Canadian fruit juice company Lassonde Industries Inc. is fast-tracking its U.S. growth strategy with the $390-million (U.S.) acquisition of a major private-label player in New Jersey.
Lassonde is betting that its purchase of Carneys Point, N.J.-based Clement Pappas and Co. Inc., which specializes in cranberry juices, blends and sauces, will not only add a complementary mix of products but also allow it to build an even stronger U.S. presence.
"This acquisition provides a platform for continued growth in the U.S. market through Clement Pappas's extensive coast-to-coast network," Lassonde chief operating officer Jean Gattuso said on a conference call Monday.
Based in Rougemont, Que., the province's apple heartland, Lassonde has a modest presence in the U.S. Northeast. The deal with Pappas, the second biggest U.S. private-label fruit-juice provider, will give it five plants and a cranberry receiving station in New Jersey, North Carolina, Maryland, Arkansas and California.
"This will take them to another level in the U.S.," said Industrial Alliance Securities analyst Leon Aghazarian.
"We think it's definitely a great strategic fit for Lassonde's business, allowing it to establish a solid footprint in the U.S."
Both Lassonde and privately held, family-owned Pappas got their start as vegetable canners and subsequently diversified into fruit juices.
Lassonde fruit juice brands include Oasis, Allen's, Old South and Rougemont, while Pappas's core line of branded products is under the Ruby Kist label.
Pappas's predecessor company pioneered the commercial production of cranberry sauce in the U.S.
Key Pappas family members will stay on to manage the Pappas subsidiary, which will retain its name.
Under terms of the all-cash deal, Lassonde will own 71 per cent of Pappas. Of the remaining 29 per cent, 19 per cent will be held by the Pappas family and 10 per cent by the Lassonde family.
Pierre-Paul Lassonde is chairman and chief executive officer of Lassonde, which was founded in 1918.
The proposed acquisition will boost Lassonde's annual sales to the $950-million (Canadian) range from about $550-million.
The transaction, to be financed with a $253-million (U.S.) credit facility, is expected to close in August.
Lassonde Industries will invest about $106-million, with another $44-million to come from members of the Pappas and Lassonde families.
Lassonde employs about 1,200 people, while Pappas, founded in 1942, has about 630 employees.