B&G Foods details financing process, leverage targets after debt sale

By Devika Patel

Knoxville, Tenn., May 17 – B&G Foods, Inc. follows a set model when financing acquisitions, typically taking its debt up beyond 5x, issuing equity to pay down the newly acquired debt and leaving the company with leverage metrics in the low fours, ready to do its next acquisition.

“We can easily finance today whatever we need to do,” president and chief executive officer Robert C. Cantwell said at the BMO Capital Markets 12th Annual Farm to Market Conference in New York on Wednesday.

“We restructured our debt structure here in the last month and a half, early part of April, end of March.

“So we are ready.

“We have an available $500 million revolver.

“We got rid of our senior secured debt structure.

“We can easily go and add to that,” he said.

Cantwell said that the company is willing to raise its leverage metrics past 5x for an acquisition but it would not keep its leverage this high for long, taking the leverage back into the low fours in order to do subsequent acquisitions.

“We are very willing to bump past 5x leverage on the acquisition.

“We are not willing to keep that above 5x leverage long-term.

“The typical B&G model has always been do the acquisition, if we lever up close to 5x or above 5x, look at taking that leverage back down into the low fours, so we reload the balance sheet to do the next acquisition,” he said.

Cantwell also said that B&G would probably tap the equity markets to fund its de-levering efforts following an acquisition, which is consistent with the company’s acquisition model.

“From an investor point of view, we typically wouldn’t come to the market to raise equity prior to taking leverage up but we’re going to be opportunistic and if it’s the right time, we’re going to consider it. But the reality is we do the acquisition, we’re going to lever up to 5.3x, 5.4x, 5.5x, we’re coming back to the equity market to try to take a ton of leverage off.

“And that’s been B&G’s consistent model and the model really is, an investor should understand we’re going to buy things well below where we trade.

“We believe that accretion day one is important.

“We’re going to buy cash flow only, so we’re going to share 60% of that cash flow back in the form of dividends, kind of with the next quarterly dividend announcement.

“And then we’re going to dilute you at some point because we got to raise equity because we’re giving out most of our cash flow in the form of dividends so we can’t naturally deleverage in a big way so we need some equity, equity markets as we do acquisitions to de-lever to be able to do the next [acquisition].

“So that’s the B&G model we’ve been following since we’ve gone public and, so far, it’s worked and we’re going to keep doing it,” he said.

B&G is a Parsippany, N.J.-based manufacturer and distributor of shelf-stable foods.

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