Dive Brief:

• HelloFresh has agreed to buy Factor75, an Illinois-based firm that sells ready-to-eat meals oriented around health and wellness, according to a press release.
• The transaction is worth up to $277 million in cash, including $177 million to be paid when the deal closes and $100 million in the form of performance-based earn-out and management incentives.
• ​HelloFresh is announcing an expansion into the competitive prepared meals business shortly after posting third quarter results showing it took in more than $1 billion in revenue.

Dive Insight:

HelloFresh’s move to absorb Factor75, known as Factor, is poised to bolster both companies’ ability to supply meals to customers in the United States, where half of the record five million active customers HelloFresh counted in the third quarter live.

The acquisition of Factor, founded in 2013 and headquartered in Batavia, Illinois, will bring HelloFresh its first office in the Chicago area. HelloFresh will also gain four production and fulfillment facilities. In addition, a new facility capable of producing more than $500 million in prepared meals a year is set to begin operations “in the near future,” according to the announcement.

The transaction needs clearance from U.S. regulators and approval from Factor’s shareholders and is expected to take up to several months to close. HelloFresh plans to operate Factor alongside its namesake, Green Chef and EveryPlate lines

Beyond providing access to a broader base of potential customers in one of the most important markets for HelloFresh, which operates in 14 countries, the deal gives it a way to expand into the ready-to-eat meal business. That sector is poised for significant growth and could develop into a multi billion-dollar business, HelloFresh U.S. CEO Uwe Voss said in a statement.

Factor sells fresh meals that feature a range of health-centric ingredients. The company sells a changing menu of breakfast, lunch and dinner choices, including Keto, Paleo, low-carb and vegetarian meals.

HelloFresh’s purchase of Factor puts it squarely into competition with Swiss food giant Nestlé, which announced plans in October to buy Freshly, another U.S. provider of freshly prepared, ready-to-eat meals. Freshly is expected to record $430 million in sales in 2020 and is in the midst of an effort to expand its production capacity to meet rapidly growing demand.