American Italian Pasta Company will acquire seven leading pasta brands from Borden Foods.
AIPC will be buying the pasta brands for approximately $67.5 million. More surprising than AIPC’s wish to acquire the brands is Borden’s wish to sell them. However, the company has expressed a wish to consolidate its operations and realize some gains from the substantial investment in its brands. This sale may well be the first of many.
American Italian Pasta Company (AIPC), a leading player in the US dry pasta market, has signed an agreement with Borden Foods to acquire Anthony’s, Globe A-1, Luxury, Mrs. Grass, Pennsylvania Dutch, R&F, and Ronco pasta brands. These brands enjoy combined annual sales of approximately $63 million. The transaction is expected to close in AIPC’s fiscal fourth quarter, which ends September 28, 2001, following normal regulatory reviews.
AIPC, which owns Mueller’s brand pasta and also supplies generic product to other marketers and large kitchen operations, will realize significant economies of scale from combining the brands with its own manufacturing, distribution and logistics systems. The company will also now be in a position to expand its position in the branded pasta market.
The transaction, which does not include any of the Borden Foods pasta manufacturing facilities, is likely to be the first of many. In its press release, the company stated it is actively engaging in discussions with other players in the industry to establish the potential for deals involving the remainder of its brands including Classico, Aunt Millie’s, Wyler’s, Pasta Anytime, Borden Foods Canadian and Borden Foods Italian businesses.
Classico is the number one selling bottled pasta sauce in the US. The industry will now be watching to see how the company moves to capitalize on this brand’s success. With the manufacturing facilities remaining under the control of Borden it could be that the company will focus its efforts on building strong brands in the sector and then selling them off to other players, an innovative tactic designed to leverage maximum gains in a slow market.
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By GlobalDataCertainly this approach is aligned with the creative direction of the firm’s owners and fits with their need to accrue substantial profits for their investors.
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