Inventure Foods Inc (NASDAQ:SNAK)
Shares of Inventure Foods Inc (NASDAQ:SNAK) rallied 27.5% after the specialty food marketer confirmed the signing of a definitive asset purchase agreement for the sale of one of its largest businesses. The company has signed a deal with the Oregon Potato Company for the sale of its frozen food business. The segment includes Rader Farms and Willamette Valley Fruit.
The strategic divestiture should be complete before the end of the month and is expected to generate up to $50 million for Inventure Foods Inc. (NASDAQ:SNAK). In addition, the transaction represents an important step in the company’s ongoing strategic and review process that seeks to grow shareholder value.
Wednesday’s rally helped propel the stock above a key resistance level at the $4 per share mark. Inventure Food’s stock has underperformed the overall food industry after losing more than 50% in market value since the start of the year. The stock is currently trading in a $4.03 – $4.45 trading range.
A sell-off of the frozen food business comes at a time when Inventure Foods Inc. (NASDAQ:SNAK) is struggling with a huge debt load, which it needs to refinance if it is to strengthen its financial flexibility.
“This is a significant second step under our strategic and financial business review. We intend to use the proceeds from the transaction to further reduce our debt and improve our overall financial flexibility in order to allow us to focus on continuing to grow our leading snack business as we finalize our strategic review,” said CEO, Terry McDaniel.
Inventure Foods is to use proceeds from the transaction to repay in full its indebtedness under a revolving credit facility with Wells Fargo & Co (NYSE:WFC), among other lenders.
The spin-off of the frozen food business comes after the company posted a net loss of (-$1) million for the second quarter compared to a net income of $61,000 generated a year ago. Consolidated net revenues in the quarter decreased 11.1% to $51.4 million compared to $57.8 million in Q2 2016.
Gross profit increased to $10.1 million from $9.7 million generated a year ago. Inventure Foods Inc. (NASDAQ:SNAK) attributes the increase to a $1. 1 million increase in the snack segment
I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.
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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.