Flowers Foods, Inc. announced a definitive agreement to acquire Canyon Bakehouse LLC, a privately held, gluten-free baking company based in Johnstown, Colo., for approximately $205 million (including a performance-based contingent payment of $5 million), or $175 million net of future tax benefits of approximately $30 million on a net present value basis. The acquisition, which is subject to regulatory approval and customary closing conditions, is expected to be completed later in the fourth quarter of 2018.

Canyon Bakehouse offers a line of 21 gluten-free breads, buns, bagels, English muffins, and specialty items. Almost 90% of its sales are distributed frozen through natural, specialty, grocery, and mass retailers around the country, with the remainder sold fresh. The Canyon Bakehouse brand is the top gluten-free loaf brand in natural and specialty food stores,¹ the number-two brand in the overall gluten-free loaf category and the fastest-growing gluten-free bread loaf brand in the U.S.²

The company was founded by Josh and Christi Skow and Ed Miknevicius in 2009, after Christi was diagnosed with celiac disease. Canyon Bakehouse now employs 206 people and operates in a recently constructed 165,625-square-foot bakery with two production lines in Johnstown. After the transaction, Josh will continue to lead the business as president and Christi will serve as brand ambassador.

"Canyon Bakehouse is an innovative leader in a growing segment of the bakery category, which closely aligns this acquisition with our strategic goals," said Allen Shiver, Flowers' president and chief executive officer.  "They have great products, a talented team of employees, a state-of-the-art gluten-free bakery, and a brand with an enthusiastic fan following. We see opportunities to leverage Flowers Foods' distribution network and retail partnerships to drive growth by bringing Canyon Bakehouse products to more consumers across the country. We look forward to welcoming Josh, Christi and the rest of Canyon Bakehouse's employees to the Flowers team."

Canyon Bakehouse CEO and Founder Josh Skow said, "Since the beginning, the mission of Canyon Bakehouse has been to help those who have given up gluten to Love Bread Again^®. We are tremendously pleased with the brand, the products and the teams that we have developed and grown over the past nine years, and we are thankful for the many partners who have helped us along the way. We are now very excited about the opportunities for our company alongside Flowers Foods. With Flowers' national reach, we will be able to bring our gluten-free products to many more consumers.  Flowers shares our passion for baking and they understand what makes our company and our products unique. We look forward to joining the Flowers Foods family."

Canyon Bakehouse has generated a compound annual net sales growth rate of approximately 45% since 2014. According to IRI and SPINS data, the gluten-free packaged bread category has grown at a compound annual growth rate of 6.6% per year since 2015, outperforming the broader $14.5 billion U.S. retail baked goods market.³ The company has anticipated 2019 sales of approximately $70 million to $80 million.

Flowers plans to fund the transaction with cash on-hand and existing credit facilities. The company anticipates the transaction will be accretive to fiscal 2020 earnings. 

Flowers Foods' financial advisor is Deutsche Bank, and Jones Day is the company's legal counsel. Canyon Bakehouse is represented by financial advisor Integris Partners and Brownstein Hyatt Farber Schreck, LLP as legal counsel.

¹SPINS Natural and Specialty Outlet Gluten Free Loaf Bread for 52 Weeks Ending 10-07-18

²IRI Custom Database MultiOutlet + SPINS Natural and Specialty Gluten Free Loaf Bread for 12 Weeks Ending 10-07-18

³IRI Custom Database MultiOutlet Gluten Free Fresh Packaged Bread for Fiscal Year 2015 vs 52 Week Ending 10-07-18 and SPINS Database for Fiscal Year 2015 vs 52 Week Ending 10-07-18