Pete's acquired by Local Bounti for $122.5M
Local Bounti Corp., an indoor agriculture company, has entered into a definitive agreement to acquire California-based complementary indoor farming company Hollandia Produce Group Inc., which operates under the name Pete's®, for total consideration of $122.5 million, subject to customary adjustments. The transaction consideration will comprise $92.5 million in cash, expected to be provided pursuant to Local Bounti's existing lending facility with Cargill, and the remaining $30 million of consideration payable in shares of Local Bounti common stock.
Pete's is a California-based indoor farming company with three greenhouse growing facilities, including two operating facilities in California and one under construction in Georgia, which is scheduled to begin operations in the second quarter of 2022. Pete's has distribution to approximately 10,000 retail locations across 35 U.S. states and Canadian provinces, primarily through direct relationships with blue-chip retail customers, including Albertsons, Kroger, Target, Walmart, as well as Whole Foods and AmazonFresh. Pete's primary products include living butter lettuce — where it is a leading provider with an approximate 80 percent share of the CEA market within the Western U.S. — as well as packaged salad and cress. Pete's has been in operation for over 50 years while focusing the last 25 years in leafy greens, has long-standing relationships with the majority of its customers, and has a demonstrated track record of generating positive EBITDA.
Local Bounti plans to install its patent pending Stack & Flow Technology at Pete's three facilities, combining the best aspects of vertical farming and greenhouse growing technologies to deliver higher yields of diverse leafy greens at superior unit economics. The transaction also allows Local Bounti to gain access to Pete's existing retail customer base of more than 10,000 retail locations nationwide.
"This synergistic acquisition is a unique opportunity to combine a highly-complementary and profitable CEA market leader in Pete's with Local Bounti's technological solutions to significantly accelerate market access for our superior produce varieties and create one of the largest CEA companies in the United States," said Craig Hurlbert, co-CEO of Local Bounti. "Our best-in-class unit economics at Local Bounti are enabled by our efficient and cost-effective system. The acquisition of Pete's allows us to de-risk our operational execution in the near-term with their proven model while offering significant synergies to ramp their production with a retrofit of our Stack & Flow Technology. We are thrilled to leverage our combined strengths through this transaction, which brings significant opportunity to drive yield enhancements to service a growing blue-chip retail customer base. This transaction provides instant scale that creates immense value for our employees, customers, partners and shareholders alike and we couldn't be more excited about what lies ahead."
"For 50 years we have been obsessed with offering high-quality products and great service while focusing on innovation and sustainability within the indoor farming space. By combining with Local Bounti, we scale our business and partner with a leader that shares in our philosophy," said Brian Cook, CEO of Pete's.
It is anticipated that all of Pete's 130 employees will join Local Bounti for a combined total headcount of 250 employees. Pete's management team is expected to remain in place as the company becomes a wholly owned subsidiary of Local Bounti.