SpartanNash to Acquire Caito Foods Service

SpartanNash and Caito Foods Service have entered into a definitive agreement under which SpartanNash will acquire certain assets of Caito Foods Service and Blue Ribbon Transport (BRT). Under the terms of the agreement, SpartanNash will acquire Caito's produce distribution business, fresh cut fruits and vegetables business, the company's newly constructed Fresh Kitchen facility which is designed to process and package fresh-prepared foods, and the logistics business of BRT.

The acquisition will strengthen SpartanNash's product offerings to its existing customer base by expanding into the fast-growing freshly prepared centerplate and side dish categories.

Founded in Indianapolis in 1965, Caito Foods Service is a leading supplier of fresh fruit and vegetables to grocery retailers and food service distributors across 22 states in the Southeast, Midwest and Eastern United States. Caito and BRT, which generate combined annual revenues in excess of $600 million, currently service customers from facilities in Indiana, Ohio and Florida. Caito also has a central fresh cut fruit and vegetable facility in Indianapolis and is completing construction on its new 118,000 square foot Fresh Kitchen facility, also in Indianapolis. The $32 million Fresh Kitchen will process, cook and package fresh protein-based foods and complete meals; it is expected to be fully operational in the first quarter of 2017. The company offers temperature-controlled distribution and logistics services throughout North America through its affiliate Blue Ribbon Transport.

"We are excited about this opportunity to expand our presence in serving some of the fastest-growing categories in grocery, including fresh produce, value-added fruits and vegetables and protein-based prepared food," said Dennis Edison, SpartanNash's CEO and Chairman of the Board. "Caito Foods Service is a premier distributor with best-in-class food processing facilities, including its new Fresh Kitchen. In addition, Caito's service area is complementary to our current distribution footprint, and we look forward to serving customers in new areas in addition to enhancing our offerings to existing customers. In short, this acquisition further strengthens our platform and enhances our ability to help our customers serve their consumers, benefiting our associates and the communities we serve, as well as delivering value for shareholders."

Caito and BRT will become part of SpartanNash's food distribution segment following the close of the transaction. Caito's senior leadership team, including Caito President Robert Kirch and Blue Ribbon Transport President David Frizzell, will join SpartanNash upon completion of the transaction. Mr. Kirch will report to Dave Staples, SpartanNash President and Chief Operating Officer; Mr. Frizzell will report to Derek Jones, SpartanNash Executive Vice President, President of Wholesale and Distribution Operations. Both will continue in their roles and oversee the acquired operations which will remain based in Indianapolis.

Kirch noted, "With our long history and family tradition of processing and distributing fresh, convenient, healthy foods, we are excited and proud to join an organization that shares our passion and commitment to serve customers with the freshest foods. We are looking forward to joining the SpartanNash family to expand and enhance our combined ability to deliver high quality fresh products efficiently to a greater number of customers across the country."

Under the terms of the transaction, SpartanNash will purchase certain assets of Caito Foods Service and Blue Ribbon Transport for approximately $217.5 million in cash, in addition to reimbursing Caito for certain transaction costs and providing two earn-out opportunities that have the potential to pay the sellers an additional $12.4 million collectively if the business achieves certain performance targets. The transaction is expected to be accretive to full year 2017 earnings. The purchase price will be funded with proceeds from SpartanNash's asset-based lending facility.

SpartanNash expects to close the acquisition by early January 2017, subject to regulatory approval and customary closing conditions.