"Freybe's modern production facility has significant unutilized capacity. Correspondingly, it is an ideal solution for replacing the capacity of our deli meats production facility in Richmond, B.C., which is scheduled to be shut down later this year," said George Paleologou, president and CEO of Premium Brands.
He said the Freybe plant, which according to the company website employees some 250 people, will also support growth in the United States by making products for the Hempler Foods Group, in Ferndale, Wash., another Premium Brands business.
"Hempler has, in recent years, been growing at an average compounded rate of almost 17 per cent over the last three years," Paleologou said.
Sven Freybe will continue to be president and CEO of the Vancouver-area deli foods business founded in 1844.
"Our family is very proud of the business we have built over the last six generations but we recognized that we needed a partner to help Freybe in the next stage of its evolution," said Henning Freybe, the company's chairman, who is retiring.
"I know for certain that Premium Brands is that partner."
Andrew Raphael, a partner at chartered accountancy and business consulting firm MNP, says the fact that Premium is keeping the current president and CEO shows its confidence in the family-run operation.
He says this deal positions Freybe to be an international competitor.
"To make Freybe more of a global brand where I think it can compete, I think Premium adds a lot of knowledge, horsepower and resources," said Raphael, who is the firm's director of food and manufacturing group.
"Scale is getting more and more important. You need the scale in order to compete."
Premium Brands says the purchase price is $55 million, subject to adjustments that could raise or lower the amount.
In addition, Premium expects to sell Freybe's manufacturing plant to a limited partnership after the deal closes and lease back the facilities. Premium Brands says it will receive $22.8 million in net cash from the side deal and own 35 per cent of the limited partnership that buys the plant.
The Freybe plant has excess capacity that Premium Brands will use for some of its other products.
Vancouver-based Premium Brands produces a range of specialty meats and other foods from operations in British Columbia and five other provinces as well as in Washington State and Nevada.
Among its brands are Grimm's, Harvest and McSweeney's.
It says the purchase price for the Freybe business will be reduced by any debt assumed by Premium Brands and could be increased by up to $1.25 million per year for each of the next four years if Freybe meets certain performance targets.