Insignia Sells Chip Maker to Utz

Insignia Capital Group has agreed to sell Truco Enterprises to publicly traded Utz Brands for $480 million. Insignia acquired Truco in June 2014 from Arbor Investments which had purchased the company in 2004.

Truco Enterprises is an asset-light developer and marketer of tortilla chips, salsa, and queso under the On The Border (OTB) brand. Truco’s products are produced through co-manufacturers and are sold nationally through grocery retailers, club stores, and mass merchandisers. The company, led by CEO Shane Chambers, was founded in 1991 by David Silver and Roy Truitt and is headquartered in Dallas.

The purchase price of $480 million is approximately 9.6x Truco’s estimated fiscal 2020 adjusted EBITDA of $50 million. Utz also anticipates future operating synergies of $5 million and approximately $20 million in net present value of future tax deductions. Incorporating these future values into the multiple calculation – $55 million of adjusted EBITDA and a net purchase price of $460 million – yields a net adjusted EBITDA multiple of 8.4x.

During Insignia’s six-year holding period, Truco’s adjusted EBITDA more than tripled. “It has been a true pleasure partnering with the Truco team to generate this exceptional outcome for all of the company’s stakeholders,” said David Lowe, CEO of Insignia Capital. “We believe Utz will be an exceptional steward of the brand as Truco executes on its next phase of growth.”

The buy of Truco provides Utz with a growing brand in the $6.2 billion retail tortilla chip category (On The Border is ranked as the #3 brand) and in the salsa, queso, and dips categories.

“The Truco team is thrilled to be joining the Utz family of brands, and we are thankful to our partners at Insignia Capital for all of their support,” said Mr. Chambers. “On The Border is now one of the fastest-growing Tortilla chip brands and the fastest growing dip brand in the category.”

“This strategic acquisition will make Utz a significant competitor in the tortilla chip sub-category, where On The Border holds the #3 position, and also provides us with a meaningful position in salsa, queso, and dips,” said Dylan Lissette, the CEO of Utz.

Utz Brands (NYSE: UTZ) manufactures branded snacks under the Utz, Zapp’s, Golden Flake, Good Health, Boulder Canyon, Hawaiian, and Tortiyahs! brands. The company’s products are distributed nationally and internationally through the grocery, mass merchant, club, convenience, and drug channels. Utz is headquartered 50 miles north of Baltimore in Hanover, Pennsylvania and operates fourteen facilities in Pennsylvania, Alabama, Arizona, Illinois, Indiana, Louisiana, Washington, and Massachusetts. Utz was founded in 1921 by Bill and Salie Utz and went public in August 2020 through a merger with Collier Creek Holdings, a special purpose acquisition (SPAC) company.

Collier Creek Holdings was formed in October 2018 by Roger Deromedi, the former chairman of Pinnacle Foods and the former CEO of Kraft Foods); and Chinh Chu and Jason Giordano, senior managing directors of CC Capital.

Insignia Capital invests in lower middle-market companies that have from $5 million to $30 million of EBITDA. Sectors of interest include business services, consumer, and healthcare. The firm is headquartered near San Francisco in Walnut Creek, California.

Harris Williams is the advisor to both Truco and Insignia Capital, while Goldman Sachs and Bank of America are advising Utz Brands.

“There is strong consumer demand in the snacking sector and Truco’s market share, performance and brand positioning within its product categories were key drivers of interest in the business,” said Tim Alexander, a managing director at Harris Williams. “Truco has found a fantastic partner in Utz and we look forward to seeing how the brand will evolve under new ownership.”

This transaction is expected to close in December 2020.

© 2020 Private Equity Professional | November 17, 2020

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