Yahoo Finance Snyder’s-Lance’s 3Q15 Results Don’t Give Investors Much to Cheer
Can the Diamond Foods Acquisition Expand Snyder’s-Lance's Reach?
Snyder’s-Lance stock price fell after 3Q15 results
Snyder’s-Lance (LNCE) stock price fell by 10%, to $32.4, after it released its 3Q15 results on October 28, 2015. Snyder’s-Lance’s investors may have been disappointed with the 3Q15 results that fell below consensus Wall Street analyst estimates on both revenue and EPS (earnings per share). Along with its 3Q15 results, the company also made an announcement of a definitive agreement to acquire Diamond Foods (DMND), whose shares rose more than 6.7%, to $37.2, on the news of the acquisition.
Analyzing the capital structure of the combined company
Considering the capital structure of Snyder’s-Lance and Diamond Foods together, it would have an investment grade capital structure, with sustainability for long-term. Snyder’s-Lance expects to refinance the debt of Diamond Foods at investment grade rates. The company plans to issue a new term loan to fund the cash payment to the Diamond shareholders.
It had a pre-synergies leverage ratio of 4.3x EBITDA. The company also plans to pay down its debt quickly by 2017 and estimates leverage ratio to fall to less than 3x of EBITDA by that time.
Shareholder value
Snyder’s-Lance is committed to creating value for its shareholders. The ~$1.9 billion deal to purchase Diamond Foods values the latter company at 15x fiscal 2015 EBITDA, excluding synergies. Including synergies, the multiple is estimated at 9.5x fiscal 2015 EBITDA.
Peer group comparison
In comparison, Snyder’s-Lance’s peers in the food industry (XLP) Post Holdings (POST) Hershey (HSY) were trading at forward EBITDA of 11.8x and 12x, respectively.
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