Kind is working with investment banks to advise it on selling a minority stake that will value the snack bar maker at more than $3 billion, including debt, according to Reuters.
A deal could also give Kind, which has developed a brand known for using ingredients that people are familiar with and can pronounce, its first corporate partner to expand its distribution efforts in the U.S. and abroad. Euromonitor estimates Kind has $727 million in annual sales.
- Reuters said the investment could attract large food companies such as Kellogg, General Mills, Campbell Soup, PepsiCo and Mars. Kind is not looking to sell the entire company.
The sale of a stake in Kind, known for its popular snack bars filled with nuts, berries, chocolate and other natural ingredients, could be a win-win for both the snack company and a major food products manufacturer desperate to boost slumping sales. For Kind, the bar company could tap into a larger player’s worldwide distribution infrastructure to grow its market share and lower its cost to acquire ingredients in bulk.
It’s uncertain how much of the company Kind is looking to sell, but it would be wise to retain a majority portion in order to keep control of major decisions and the independent view the public has of the company. In the case of General Mills, PepsiCo or another food and beverage manufacturer facing slowing sales as consumers abandon processed foods, an investment could help increase their focus in healthier products and those with a smaller list of more wholesome, recognizable ingredients popular with shoppers.
In most cases, big food companies seem to successfully integrate the smaller companies they acquire. But there are several high-profile examples recently where the deals, at least initially, have run into challenges and prompted analysts to question whether the buyer overpaid.
Campbell Soup has faced challenges since acquiring Bolthouse Farms and Garden Fresh Gourmet brands in 2012 and 2015, respectively. The maker of its namesake soups, Pepperidge Farm cookies and Goldfish crackers, is hoping for an easier integration of natural and organic brand Pacific Foods, which it purchased last week for $700 million in cash.
Dr Pepper Snapple first acquired a stake in antioxidant beverage maker Bai two years ago for $15 million. Last November, the beverage conglomerate agreed to buy the rest of the company for $1.7 billion. After early evidence that it was struggling to integrate the purchase, Dr Pepper recently dismissed the founder of Bai as CEO and replaced him with a 10-year corporation veteran.
Smaller companies such as Kind often benefit from their nimbleness, innovation and levels of execution. It may be harder for a bigger company with more levels of management and dozens of products in their portfolio to make immediate changes that respond to the rapidly changing needs and demands of the consumer’s appetite.
At the same time, Kind may be able to grow sales on its own, but could do so much faster with a larger corporate partner. The bar maker would be wise to find ways to expand its reach, but it risks losing some of the trendiness that has made it popular with millennials and other consumers if it sells too much of the company and loses its invaluable independence.