Natural Foods Merchandiser

$102 million raised to acquire 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 a company called Boulder Specialty Brands.

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

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. The units trade on the over-the-counter bulletin board under the ticker symbol BDSBU. Citigroup managed the offering.

Hughes is vice chairman and chief executive of the new company. His partner, James Lewis, is 60 percent owner of Centennial Specialty Foods Corp., whose holdings include 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 acquisition targets as companies in the specialty, ethnic, natural/organic, functional foods and other premium categories.

"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, most of which are money management firms, must approve any potential deal. "If we don't get a deal done, there's basically no downside," he said.

"Most importantly, we have a public company stock as a form of consideration, which we think is going to be appealing to some [sellers]."

That may be true, said Mike Chase of Health Business Partners, an investment banker in Warwick, R.I. For example, a potential seller seeking to retain a stake might want to structure a deal involving public stock that could be sold later.

Just having an executive team with experience in natural and organic products 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 among those funds looking for deals."

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 from 2000 to 2002 and senior vice president of marketing and sales for White Wave Foods from 2002 to 2004.

Before joining Celestial, Hughes worked for such packaged food giants as ConAgra Foods Inc., Tropicana Products Inc. and McCormick and Co.

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