Natural Foods Merchandiser

$102 million raised to buy natural brands

Former Celestial Seasonings executive Steve Hughes is looking for food and beverage brands to buy after closing a $102 million initial public offering of shares in Boulder Specialty Brands.

The IPO took an unusual form called a "blank check" offering, in which a company raises funds without specifying what the proceeds will be used for.

In December, Boulder Specialty Brands, based in Longmont, Colo., sold more than 12.7 million units for $8, each containing one share of stock and one warrant to buy a second share for $6. Citigroup managed the offering.

Hughes is vice chairman and chief executive. His partner, James Lewis, is 60 percent owner of Centennial Specialty Foods Corp., which owns the Stokes and Ellis canned chile brands.

Citing securities laws, Hughes declined to discuss what companies might be on Boulder Specialty Brands' shopping list. But the offering prospectus describes potential targets as specialty, ethnic, natural/organic or functional foods. "The hottest trend out there is natural and organic," he said.

To describe the offering as a blank check is misleading, Hughes said, because $7.71 of each $8 share is held in trust and will be returned to the investor if a deal is not closed. Investors must approve any potential deal. "Most importantly, we have a public company stock as a form of consideration, which we think is going to be appealing to some [sellers]," he said.

That may be true, said Mike Chase of Health Business Partners, an investment banker in Warwick, R.I. Having executives with naturals experience improves Boulder Specialty's odds of closing an acquisition, Chase said. "There's a lot of money looking for deals, and there's a lot of interest in natural products."

Hughes served as president and chief executive officer of Celestial Seasonings from 1997 until the Boulder, Colo., tea maker was sold to The Hain Group. He was also chairman and CEO of Frontier Natural Products and senior vice president of marketing and sales for White Wave Foods.

Natural Foods Merchandiser volume XXVII/number 2/p. 10

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