WINONA, Minn. - Cannae Holdings, Inc. (NYSE: NYSE:CNNE), in partnership with KDSA Investment Partners, has announced the acquisition of a majority stake in The Watkins Company, a long-standing producer of flavoring products such as spices, seasonings, and extracts. The Watkins Company, with a history spanning 156 years, is recognized for its premium yet affordable product range and a strong presence in the natural and organic market segment.
The current majority owner and Chairman of Watkins, Mark Jacobs, will maintain a significant equity interest following the transaction, which is anticipated to be finalized in October 2024. This move is seen as a strategic effort by Cannae and KDSA to tap into the rapidly growing spices and seasonings sector, which is experiencing robust consumer demand.
William P. Foley, II, Chairman and CEO of Cannae, expressed confidence in the growth potential of the spices and seasonings category and Watkins' positioning within it. He indicated that the partnership would aim to elevate Watkins to new levels of success. Similarly, Watkins' Chairman Mark Jacobs expressed enthusiasm about the partnership, emphasizing the opportunity to continue the brand's legacy and expand its market reach.
David Knopf, Co-Managing Partner of KDSA, highlighted the potential for continued organic and inorganic growth for Watkins, citing the company's strong brand heritage and success. JR Rigley, CEO of Watkins, also shared an optimistic outlook on the company's future, emphasizing the commitment to maintaining quality while exploring new growth and innovation avenues.
Intrepid Investment Bankers and Fifth Third Investment Bankers provided financial advisory services to Watkins and KDSA, respectively, while legal advisory roles were filled by Sklar Kirsh, Cooley, and Greenberg Traurig.
This partnership marks a significant development for Watkins, which prides itself on its commitment to natural ingredients and high-quality flavoring products, and for Cannae and KDSA, which are looking to strengthen their portfolios in the food industry. The transaction is based on a press release statement.
In other recent news, Cannae Holdings has released its second quarter 2024 results, highlighting a strategic focus on growing its net asset value (NAV) and reducing the discrepancy between its stock price and NAV. The company has taken proactive steps to boost the performance of its portfolio companies, explore new private business investments, and return capital to shareholders. Despite a noncash impairment charge related to its Sightline investment, Cannae Holdings maintains a robust balance sheet with $29 million in corporate cash and $1.3 billion in marketable securities.
The company reported a 23% decrease in operating revenues for Q2 2024, and losses of $145 million, primarily due to the impairment charge for Sightline. However, Cannae's adjusted EBITDA more than doubled compared to the previous year, and cost reductions led to a decrease in the cost of restaurant revenues to 85.6%.
In terms of future strategies, Cannae Holdings is considering potential future capital returns to shareholders through dividends and share buybacks. It is also developing new brown liquors requiring aging, anticipating future value creation. As part of its ongoing partnership with JANA Partners, the company is considering future investments and transactions. Despite some challenges, Cannae Holdings remains optimistic about its strategic direction and its ability to offer increased returns to shareholders and capitalize on new investment opportunities.
InvestingPro Insights
As Cannae Holdings, Inc. (NYSE: CNNE) embarks on this strategic acquisition of The Watkins Company, investors might be interested in some key financial metrics and insights from InvestingPro.
Cannae's market capitalization stands at $1.15 billion, reflecting its significant presence in the investment landscape. However, the company's financial performance has been challenging recently. According to InvestingPro data, Cannae's revenue for the last twelve months as of Q2 2024 was $491.6 million, with a concerning revenue decline of 21.63% over the same period.
An InvestingPro Tip highlights that management has been aggressively buying back shares, which could be seen as a vote of confidence in the company's long-term prospects despite current headwinds. This share repurchase strategy might be particularly relevant in light of the Watkins acquisition, as it could indicate management's belief in the company's future value creation potential.
Another noteworthy InvestingPro Tip reveals that analysts anticipate a sales decline in the current year. This projection aligns with the reported revenue decline and underscores the importance of the Watkins acquisition as a potential growth driver for Cannae.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Cannae Holdings, providing a deeper understanding of the company's financial health and market position.
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