Smart Balance Completes Acquisition of Udi's Healthy Foods, LLC

Closes new senior secured credit facility expected to accelerate organic growth rate & diversify mix to natural brands.

3 July 2012 --- Smart Balance, Inc. SMBL +6.50% announced it completed its previously announced acquisition of Udi's Healthy Foods, LLC (Udi's) for $125 million in cash from majority unit holder Hubson Acquisition, LLC.

Total consideration, including transaction fees and other ordinary related adjustments, was approximately $126 million in cash, subject to a final working capital adjustment.

The acquisition, as well as the refinancing of existing outstanding debt, was financed with the proceeds of a new $280 million senior secured credit facility. The facility, which has an overall effective interest rate of approximately 7.5% is comprised of a $240 million term loan scheduled to mature in July of 2018 and a $40 million revolving credit facility scheduled to mature on June 30, 2017. As of the close of the transaction, the Company's net debt is approximately $237 million.

The credit agreement, which includes the specific terms and covenants governing the Company's credit facility, will be included in a Current Report on Form 8-K to be filed by the Company with the Securities and Exchange Commission.

Commenting on the announcement, Chairman and Chief Executive Officer Stephen Hughes stated, "We are excited to include Udi's Healthy Foods in our portfolio of health and wellness brands and believe this transaction to be transformational to our company, as it positions Smart Balance as a leader in gluten-free, accelerates our growth rate, and further diversifies our mix toward high-growth natural brands. As a result, we expect the Company's organic revenue growth rate to accelerate, and we look forward to providing our initial outlook on Udi's in connection with our second quarter call on August 2, 2012."

The Company granted option awards for a total of 957,500 shares of common stock to 65 of Udi's employees as an inducement to join the Company in connection with the acquisition. The awards were granted under a newly adopted Smart Balance, Inc. 2012 Inducement Award Plan. The options have a ten year term and an exercise price equal to the fair market value of Company common stock on the date of grant. The options vest in four equal annual installments beginning on July 2, 2013, the first anniversary of the grant date.