Local Bounti Corp., an indoor agriculture company, is buying the owner of farming peer Pete’s for $122.5 million, in a bid to expand distribution to major food retailers.
The deal for Hollandia Produce Group Inc., which operates under the name Pete’s, will include $92.5 million in cash with the remaining $30 million in Local Bounti common stock, according to a company statement seen by Bloomberg.
Craig Hurlbert, co-chief executive of Local Bounti, said the deal with Pete’s is a “super complementary transaction” that will enable it to deliver on expectations. “It only furthers our financial leadership by giving us a proven company that’s been in business for a long time,” Hurlbert said by phone. “It de-risks the whole business.”
The takeover by Local Bounti will bolster the Hamilton, Montana-based company’s position in so-called controlled environment agriculture by giving it more greenhouses and access to Pete’s broader distribution network. Pete’s, based in Carpinteria, California, sells at roughly 10,000 retail locations across 35 states and provinces in the U.S. and Canada. Local Bounti said in a December filing its lettuce and herbs are distributed at 500 locations in nine states.
Pete’s primary products, like living butter lettuce and packaged salads, are sold at retail stores including Kroger, Albertsons, Walmart and Target, according to the statement. The firm generated $22.7 million in revenue last year and has posted historical gross margins above 45% over the past five years, according to the release. The deal will be immediately accretive, according to Local Bounti, which has 12 of its own greenhouses and will gain three more from the merger, including one under construction.
Local Bounti, which went public last year by merging with a blank-check firm, uses proprietary technology that enables it to sustainably grow leafy greens like romaine lettuce or basil free of pesticides and herbicides while using 90% less land and water than traditional outdoor farming methods. The shares are down more than 40% since their debut in November.
Pete’s, which has operated for more than 50 years, will benefit from the integration of Local Bounti’s technology into Pete’s growing systems to boost crop yields and its customer base, Local Bounti Chief Financial Officer Kathleen Valiasek said.
“Pete’s is in certain geographic locations throughout the country and we will be able to leverage that customer base,” Valiasek said in an interview.