Innovative Food Holdings, a national seller of gourmet specialty foods to professional chefs, is pleased to announce the opportunistic acquisition of 100 percent of the assets of LoCo Food Distribution, based in Fort Collins, Colorado, via the Company’s subsidiary, Golden Organics, for total consideration of $357,699, consisting of an upfront cash payment of $304,269 and a one-year earnout payment of $53,430, based on hitting revenue and adjusted EBITDA targets. It is also anticipated that the Company will make an initial investment into working capital of approximately $375,000.
The purchase includes approximately $187,000 of net PP&E, mainly consisting of six refrigerated delivery trucks, warehouse racking, two large coolers, and other warehouse equipment, according to a press release. All long-term debt was extinguished as a closing condition. The business operates out of a 9,000-square-foot leased warehouse in Fort Collins. This lease expires in March 2025, at which point LoCo Foods will be moved and consolidated with the operations of the Golden Organics business in Denver.
LoCo Foods brings a significant incremental customer base and sourcing capabilities to IVFH. Its 200+ Rocky Mountain customers are primarily retailers, with the Denver divisions of three large national retail chains making up approximately 56 percent of overall revenue. The remainder consists of regional grocers, hotels, hospitals, schools, and restaurants. LoCo Foods also brings more than 500 incremental local Colorado items to IVFH’s catalog, with the largest supplier making up 14% of revenue. LoCo Foods’ incremental customer base, sourcing capabilities, and large catalog expansion all increase the long-term profitable growth opportunities for IVFH.
Post integration, the cross-selling opportunities to both Golden Organics and LoCo Foods customers are significant, as there is minimal overlap. Another opportunity is to sell Golden Organics’ catalog to LoCo Foods’ supplier base of Denver-area food manufacturers. The Company will also consolidate delivery routes, improving delivery economics and return on assets. IVFH expects synergies from back office consolidation, implementing a single ERP system, and integrating a single warehouse management system. The Company also intends to expand LoCo Foods’ growth opportunities by providing access to the other sales channels under the IVFH umbrella. These opportunities should further improve the deal’s economics and will be a key focus post-closing.
LoCo Foods’ business will be managed by the President of Golden Organics business, Taeshaud Jackson, along with a key employee from LoCo Foods, Sam Novotny. The Company has also signed a consulting agreement with Elizabeth Mozer. The Company will continue to use the LoCo Foods brand name given the strong reputation it has garnered with its vendors and customers over the years.
Chief Executive Officer of IVFH, Bill Bennett, stated, “We’re very enthusiastic about this acquisition, as it helps us launch new categories, enter new markets, and access new customers, with simple immediate cost savings opportunities to better leverage the Golden Organics assets we recently purchased. This transaction is consistent with our previous commentary about our acquisition search criteria and far exceeds our rate of return requirements before including the upside from synergies. We believe the financial terms of this transaction are attractive with only factoring in the near term, committed relocation of the business, and before including any cost/revenue synergies or other long-term strategic implications. Not only do we look forward to Elizabeth and Sam’s assistance with the move and integration, we are sincerely excited for the long-term contributions they will bring to the business given their intricate knowledge, deep local network, and proven expertise relating to LoCo Foods and all of its stakeholders. Given the opportunistic purchase price and structure of this deal, as well as the know-how of the team we are onboarding, this is an exciting additional opportunity for IVFH in the Denver market.”
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