Sandwich maker Premium Brands on a roll as stock soars

$146 million acquisition of Montreal meat packer is largest transaction in Premium Brands' history
Premium Brands has diversified its product line to include seafood, chicken, beef, pastry and dairy, whereas years ago almost all revenue came from pork sales | Tony Hurley Photography Ltd.

After 15 years in business and more than 60 corporate acquisitions, Premium Brands Holdings Corp. is set to close the largest purchase in its history.

The Richmond-based food processor and sandwich maker agreed in late March to buy Montreal meat packer C&C Packing Inc. and sister company Premier Meat Packers (2009) Inc. for $146 million.

“The deal gives us more of a national platform,” Premium Brands CEO George Paleologou told Business in Vancouver. “Our food service specialty retail platform is very significant in Western Canada, and a lot of the customers we have are national.”

C&C’s business is centred in Ontario and Quebec, so buying that company helps Premium Brands broaden the distribution of its many processed food brands, such as Freybe and Grimm’s, that until now have been chiefly sold in the western provinces.

Paleologou closed an $86.25 million financing April 12, and he told BIV that he expected to complete the acquisition a few days later.

Under the pact, Premium Brands would pay C&C owners, the Cons family, $102 million in cash as well as Premium Brands (TSX:PBH) shares.

The shares, which hit an all-time high close of $57.99 on April 14, are up in price about 52% in 2016 and 93% in the past 12 months.

Driving that success is a company that increased annual revenue 21% to nearly $1.5 billion in 2015.

While most of that revenue is generated within Canada, the U.S. side of the business has been rising quickly. Back in 2008, the company sold only about US$12 million south of the border. That leapt to US$349 million last year.

Paleologou said that his company sells products in every U.S. state, “give or take one or two.”

In addition to selling packaged meats through grocery stores, Premium Brands also manufactures and provides Bread Garden-branded sandwiches to Chevron Town Pantry convenience stores. It also delivers food to hospitals, restaurants and hotels.

Paleologou has steered Premium Brands since 2001, first as president and then, since 2008, as CEO. 

Though he never allows photos of himself to appear on the company’s website or in corporate documents, he has left an indelible stamp on the company.

When Paleologou took over, the company was mainly a Western Canada-focused venture with assets in B.C., Alberta and Saskatchewan. Its revenue was about one-tenth what it is now, and most of its sales were for pork-based processed meats.

That made Premium Brands susceptible to the wild cyclical swings in hog prices. It also disproportionately tied the company’s fortunes to western Canadian economies.

A steady stream of acquisitions later, the company has 5,500 employees, including about 1,500 in B.C., where it operates five manufacturing plants and maintains its headquarters.

Its vulnerability to fluctuations in raw materials prices has been reduced, with its exposure now spread across pork, beef, seafood, dairy, flour and poultry.

In B.C., some of the company’s moves in recent years include its 2013 decision to open a seafood processing facility in Richmond and operate it under the brand name C2C Premium Seafood.

That move coincided with Premium Brands buying assets from the in-receivership Harbour Marine Products Inc., including its salmon and high-grade tuna sushi processing business, for $1.35 million.

Premium Brands then bought Langley-based sixth-generation family business Freybe Gourmet Foods for $55 million.

Premium Brands’ two main deals last year included the purchase, for an undisclosed amount, of Montreal-based Expresco Foods, which is best known for making marinated and grilled chicken skewers, and the acquisition of Seattle’s Isernio’s Sausage Co. for US$12 million.

National Bank Financial analyst Chris Bowes sent BIV a recent research note in which he praised the company for having 2015 fourth-quarter results that blew past analysts’ consensus expectation.

The company earned $0.53 per share, compared with the $0.40 estimate, Bowes wrote.

“The very strong results were a result of significant organic growth, with a boost from foreign exchange and acquisitions,” he said. •

gkorstrom@biv.com 

@GlenKorstrom 

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