Lehman Brothers and Credit Suisse are providing financing for B&G Foods' approximately $200 million acquisition of the Cream of Wheat and Cream of Rice hot cereal brands from Kraft Foods Global. David Wenner, B&G ceo, expects the acquisition will be financed with an expansion to its existing $50 million credit facility from the 2005 acquisition of the Grandma's Molasses brand from Mott's.
The existing credit, also led by Lehman, consists of a $25 million revolver and a $25 million term loan. Wenner expects the size to be increased to $250 million to fund the acquisition and refinance the existing debt. Exact terms of the financing and when it will be brought to market have not been disclosed. Bankers at Lehman and CS declined comment.
"We are always looking at acquisitions," Wenner said in regards to future plans. "This is the ninth one we are on and we're very good at it." Lehman also led a deal for the Parsippany, N.J.-based company in 2003, which backed the acquisition of Nestlé Prepared Food Co.'s Ortega brand for $116 million (LMW, 9/1/2003). That credit includes a five-year, $50 million revolver with a $5 million sublimit for letters of credit. "We've done a tremendous amount of work with [Lehman]," Wenner said. "They have financed deals for us the past 10 years." B&G sells and distributes a diversified portfolio of foods under brands such as Emeril's, Ortega and Polaner.
Moody's Investors Service placed the company's ratings on review for downgrade following the announcement. The agency commented the B2 corporate family rating could be confirmed if the transaction does not cause higher leverage or cash flow instability. Standard & Poor's placed its senior unsecured debt on CreditWatch negative.