Lance Inc., the maker of Cape Cod potato chips and Stella D’oro cookies, agreed to merge with pretzel maker Snyder’s of Hanover Inc. to improve distribution of the companies’ snacks.
Lance investors will receive a one-time dividend of $3.75 a share, the companies said in a statement today. Snyder’s and Lance will each own about 50 percent of the new company, to be called Snyder’s-Lance Inc. The deal will close later this year pending shareholder and regulatory approval, the companies said.
Both companies have pursued acquisitions in the past year to win more bargaining power with national retailers like Kroger Co. and Wal-Mart Stores Inc. The new company will compete against PepsiCo Inc.’s Frito-Lay in the salty snacks business.
“When Lance starts layering in the pretzel business it gains more clout, more credibility, more shelf space with the retailer,” said Scott Mushkin, an analyst at Jefferies & Co. in New York. The merger would also give Lance national distribution for its Cape Cod chips, he said.
Lance jumped $5.30, or 33 percent, to $21.30 today in Nasdaq Stock Market trading. Through yesterday, the stock had fallen 39 percent this year.
First Sandwich Cracker
The company, founded in 1913 by Phillip L. Lance and his family, sold the first packaged peanut butter sandwich cracker. Today it sells crackers, cookies, and chips under the Cape Cod, Archway, Tom’s, and Lance brand names. Snyder’s first began selling pretzels in 1909 as part of the Hanover Canning Company, its parent company until 1980. Snyder’s remained closely held.
Last year, Utz Quality Foods Inc. backed out of a proposed sale to Snyder’s, saying a request for additional information from the Federal Trade Commission would strain the company. The FTC asked for further details after two filings on the proposed merger failed to gain its approval, the two Hanover, Pennsylvania-based companies said at the time.
Lance, based in Charlotte, North Carolina, had sales of $918.2 million in 2009. Last October, the company bought cookie and breadstick maker Stella D’oro Biscuit Co. from private-equity firm Brynwood Partners LP for an undisclosed cash sum.
Lance Chief Executive Officer David Singer said on a conference call in February that the snack-food maker plans to pursue an “aggressive” acquisition strategy in 2010. Lance was among the bidders for premium potato-chip maker Kettle Foods, which was bought by Diamond Foods Inc. in March.
Singer will become CEO of the newly formed company, and Snyder’s current chief executive, Carl Lee Jr., will become chief operating officer.
Wells Fargo Securities advised the two companies on the deal. Bank of America Merrill Lynch provided a fairness opinion to Lance’s board.