Ladies and gentlemen, thank you for standing by, and welcome to the Utz ON THE BORDER Tortilla Chips acquisition announcement conference call. At this time, all participant lines are on mute. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. If you require any further assistance, please press star zero. I would now like to turn the call over to your speaker today, Anna Kate Heller from Investor Relations. Please go ahead.
Good morning, and thank you for joining us on Utz Brands conference call to discuss the company's announced agreement to acquire ON THE BORDER Tortilla Chips. On the call today is Dylan Lissette, Chief Executive Officer. Cary Devore, Chief Financial Officer, will also be available during the Q&A session that will follow the prepared remarks. During this call, management will make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could differ materially from actual events and those described in these forward-looking statements.
Please refer to Utz Brands' final perspective dated October 12, 2020, as supplemented and as filed with the Securities and Exchange Commission, and the company's press release issued this morning for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note, management's remarks today will highlight certain forward-looking non-GAAP financial measures. The company does not provide a reconciliation of these measures to the most directly comparable GAAP financial measures because of the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations due to them being forward-looking. The company also provides definitions of its non-GAAP measures in the press release issued today. The company has also prepared presentation slides and additional supplemental financial information, which are posted on the Investor Relations portion of Utz website.
You may want to refer to these slides during today's call. This call is being webcast, and an archive of it will also be available on the website. Now I'd like to turn the call over to Dylan Lissette.
Thanks, Anna Kate, and hello, everyone. I'm pleased to announce a very important transaction for Utz Brands as we have signed a definitive agreement for the acquisition of Truco Enterprises, a leader in the U.S. snack category, which has grown ON THE BORDER branded tortilla Chips, salsas, and queso dips into a leading national brand. This is a business that we've been following for some time. The acquisition of Truco Enterprises will be an important step forward in achieving the value creation and M&A objectives that we laid out during our SPAC business combination materials and investor presentations. We are very excited to be here today sharing with you the background of this important transaction for Utz Brands, which will help drive us toward our goal to be the fastest growing pure-play branded snack platform of scale in the U.S. First, some background on Truco.
It is a leading independent provider of tortilla chips, salsas, quesos, and dips through the ON THE BORDER brand, with approximately 80% of its sales in tortilla chips, 12% in salsa, and 8% in quesos and dips. The company was established almost 30 years ago in 1991 and is headquartered in Dallas, Texas, with approximately 50 associates. It is the third-largest brand in the $6.2 billion retail sales tortilla chip subcategory, which as a subcategory of salty snacks, grew 10% for the last 52 weeks ended October 4th, according to IRI. Truco is asset light, with 100% of production outsourced to co-manufacturers, driving strong free cash flow due to nominal capital expenditures and net working capital that averages approximately 6% of net sales. Over 80% of its revenue is direct-to-warehouse, with the remaining through third-party distributors.
The company has a strong presence in the mass and club channels, a growing presence in the grocery channel, and significant white space in the convenience, value, and drug channels. For fiscal year 2020, Truco is expected to generate net sales of approximately $195 million, and Truco adjusted EBITDA of approximately $50 million. It has grown well, and we expect net sales growth of approximately 32% in fiscal year 2020. Speaking to Truco's growth in 2020, the company has gained new distribution with grocery customers and has not only benefited from rolling out new innovation across grocery, mass, and club, but we believe it has also benefited meaningfully from COVID-19. Nearly 100% of its sales are in the grocery, mass, and club channels, and like Utz Brands, these channels have seen significant growth during the pandemic. The acquisition completely aligns with our value creation and M&A strategies from several perspectives.
First, it will immediately make Utz the number three platform in salty snacking with $1.3 billion in retail sales, increasing our market share from 3.9%-4.7% overall. As we know, scale and product diversification are important success factors in salty snacks. Second, it will increase our scale in the attractive tortilla chip subcategory, making Utz's platform the number three competitor in the subcategory with a market share of approximately 4%, which is consistent with our total share in salty snacks before the acquisition. It will provide us a meaningful entry into the adjacent salsa and queso subcategories, which are $1.6 billion in size combined and are growing at a combined rate of approximately 18%. It'll provide us a significantly expanded channel and geographic presence.
From a channel perspective, it significantly increases our scale in the under-penetrated mass channel, increasing our share from approximately 2.6% to 4.1%, moving us from the number four to the number three position in the mass channel. It also significantly increases scale in Utz's current expansion in emerging territories, adding approximately $190 million in retail sales, increasing our exposure to these geographies from approximately 40% currently to approximately 48% of Utz's retail sales on a combined basis. It's important to note that only approximately 14% of Truco's retail sales are in our existing core geographies, which truly speaks to the complementary nature of this acquisition. Fifth, we believe there's a meaningful channel expansion opportunity.
With approximately 60 basis points of share, Truco is underweight in the grocery channel, where Utz is particularly strong. There is a significant amount of white space in the convenience, value, and drug channels to pursue. Lastly, the acquisition of Truco has an attractive financial profile. We expect it to be accretive to earnings in 2021 and beyond, driven by its strong profitability. On a combined basis, Utz plus Truco would generate an adjusted EBITDA margin of approximately 16% in 2020, up approximately 200 basis points from Utz on a standalone basis. It presents strong synergy opportunities with identified expected cost synergies of at least $5 million. We also expect there to be incremental revenue opportunities, including selling Truco's products through our DSD network and within our core geographies, where again, Truco does not have meaningful current revenue.
It is consistent with our target leverage policy, which is to return to a 3x-4x net leverage ratio within 12 months - 18 months after closing. Touching on some of the transaction highlights, the purchase price of $480 million represents an acquisition multiple of approximately 9.2x estimated 2020 adjusted EBITDA of $50 million, excluding synergies, and 8.4x 2020 adjusted EBITDA, including run rate cost synergies of at least $5 million. In each case, including $20 million in net present value from expected tax assets resulting from the transaction. This transaction was subject to HSR approval, and we expect to close in fiscal year 2020. The acquisition includes all of the IP associated with the ON THE BORDER brand for use in the U.S. salty snacks market.
Since its inception, Truco has licensed the ON THE BORDER brand from the restaurant group of the same name for use in the salty snack category. As part of this transaction, we are buying the brand and the intellectual property to the brand for use in the salty snack category. The restaurant group will continue to own the intellectual property for use outside of snacking. Our agreement also allows for global sales and distribution of the OTB ON THE BORDER trademark within North America, Central America, South America, Europe, and certain other international markets. Utz has the debt financing commitments for the transaction from both Bank of America and Goldman Sachs. Assuming Utz fully draws these commitments, net leverage immediately following the transaction is expected to be approximately 4.8 x combined 2020 adjusted EBITDA, including run rate synergies.
As I noted previously, we currently expect to return to our stated target net leverage ratio range of 3 x- 4 x within 12 months - 18 months after closing. Please note that we will further evaluate financing options and ultimate structure prior to closing. For the combined business after closing, including expected run rate synergies and based on the 2020 guidance we published on November 5th, we expect combined Utz and Truco net sales of approximately $1.15 billion-$1.16 billion in 2020, with adjusted EBITDA of $184 million-$187 million, and an adjusted EBITDA margin of approximately 16%. Let me take a minute just to tell you a little bit more about Truco. Truco Enterprises has a long history with ON THE BORDER and high-quality blue-chip customers across the mass, club, and grocery channels. In mass, ON THE BORDER has a very strong relationship with Walmart.
Walmart represents approximately 40% of the ON THE BORDER sales. The brand has been selling to Walmart for over 20 years. In club, ON THE BORDER has a great relationship with Sam's Club. Sam's represents approximately 20% of the ON THE BORDER sales. This relationship goes back 25 years. In grocery, Truco has a number of solid relationships that add up to approximately 35% of total ON THE BORDER retail sales, including retailers like Kroger, H-E-B in Texas, Albertsons, Safeway, and Hy-Vee and Meijer in the Midwest. We are also excited about Truco's product portfolio across tortilla chips, salsa, and queso. In tortilla chips, the top products are Cafe Style, Cantina Thin, Blue Corn Organic, and Rounds. Truco also has a strong offering in salsa and queso, including some exciting new innovations that include salsa, queso, and guacamole in a squeeze bottle format.
As you can see, we like the strong customer base that ON THE BORDER has and the increased exposure it gives us with these important customers, and we are equally excited about the current innovation pipeline and future innovation opportunities that we can bring forth under the Utz platform. In addition, and very important to note, Truco has a very strong management team of seasoned executives that have done a wonderful job of building a fast-growing, very profitable business. We are excited to partner with them to grow ON THE BORDER into the future. The acquisition is a meaningful boost to our scale, and we will become the clear number three scale competitor in the salty snacks sector. In fact, within striking distance of the number two position. We talk about scale and relevance a lot as a company, and there's good reason for it.
We believe that scale is important because it increases our relevance with key retailers across the country. It puts us in a great position to capitalize on growth opportunities wherever they may come from, whether it be certain channels, subcategories, or geographic regions. It leads to stronger margins as we leverage our fixed infrastructure, which provides more cash flow to reinvest in the business for productivity, innovation, and growth. The acquisition also significantly improves our competitive positioning in a number of important large and growing channels and subcategories, including the mass and club channels and the tortilla and salsa/queso subcategories. With the addition of the ON THE BORDER brand, we will become number three in mass, number two in club, number three in tortilla chips, and number five in salsa, and even though small, number three in queso, which is growing quite well.
With improved competitive position, we believe comes improved conversations with retailers, which we can expect will have a long-term positive impact for all of our Utz Power Brands as well. Our geographic and channel mix becomes much more balanced with the ON THE BORDER acquisition. From a geographic perspective, the percentage of the ON THE BORDER retail sales in our existing core geography is a minor portion of the overall pie, which, upon combination with ON THE BORDER, will provide a significantly increased exposure to sales in our expansion and emerging geographies, as well as upside for distribution of the ON THE BORDER brands into our core markets.
ON THE BORDER is strong in states where we have great growth opportunities, like Texas, the Midwest, Florida, and California, and the acquisition should strengthen our conversations with retailers in those areas, which again, should help support long-term growth in all of our Utz Power Brands. In channels, ON THE BORDER is strong in three primary channels, mass, food, and club. This is very complementary to Utz, as it allows us to take our mass exposure as a percentage of retail sales from 15% to 19% post-closing and strengthens us in club, further diversifying our channel mix. As we stated in our SPAC investor combination materials, Utz is underweight in mass, and this is a big step forward in getting our position in the channel to where it should be. At a 19% of our total pro forma mix, we believe there is still room for continued growth.
While the food grocery channel is also meaningful today for the ON THE BORDER brand, there is a significant amount of white space to go after to grow sales in this important channel in the future. This, of course, is something we believe that Utz can help drive given our strong DSD network. The last point I will make is that ON THE BORDER has limited exposure to convenience or other important channels like value and drug, and these are both key growth opportunities for the business. Lastly, the acquisition of Truco has strong margins and cash flow benefits. On a combined basis, we expect adjusted EBITDA of $184 million - $187 million in 2020, including $5 million of run rate synergies. Our adjusted EBITDA margin as a combined company increases 200 basis points to approximately 16%.
From a CapEx perspective, Truco typically spends a minor amount per year on capital expenditures due to its use of co-manufacturers for production, which results in strong free cash flow. When combined with Utz, adjusted EBITDA, less CapEx as a percentage of adjusted EBITDA, increases from the high 70% to approximately 85% based on 2020 financials. I said at the beginning, we are very excited to be here today and to have been given the opportunity to share with you the background on this important transaction for Utz Brands. Truco Enterprises, with its ON THE BORDER brand, is an amazing company with great leadership, great people, great products, and almost 30 years of continual growth and innovation.
We look forward to combining their business with ours so that we can continue to deliver on our strategic objectives for our customers and our shareholders alike and drive toward our goal to be the fastest-growing pure-play branded snack platform of scale in the United States. Cary will now join me, and we will open up the floor to questions- and- answers.
Thank you. At this time, we will be conducting our question- and- answer session. To allow for as many questions as possible, we ask that you please limit your questions to one question with one related follow-up. Your first question comes from the line of Robert Moskow with Credit Suisse. Robert, your line is open.
Hi, thank you for the question. I'd like to know if you'd give us a couple more examples of tactics that you can use with Walmart, maybe merchandising tactics that can capitalize on your increased scale in some of these regions. You mentioned that diversification of your portfolio is a big benefit. Can you give some tactical examples of that?
Sure. Hey, Robert, this is Dylan. Thanks for the question. Let me try to answer it, if I can get to the root of your question. I think there's a couple ways to look at it. Walmart is a large customer of Truco and ON THE BORDER. They're a large customer of ours. As people have noted in the past, our indexing of our percentage of sales into Walmart and mass, the entire mass channel, are less than many of our CPG competitors, because it was only about 10% of our sales. Many of our CPG competitors are more in the 20+% range. Obviously, as we ideally grow scale with Walmart as just an important customer, they've been a great customer of Utz's for the 25+ years that I've been at Utz, and we continue to grow with them.
As we move up the scale of relevance to their category, hopefully that opens up a lot more conversations for ways that we can expand, not just with ON THE BORDER or with our Utz Brands or our Zapp's brands or some of our Power Brands, but really just have a bigger seat at the table and more conversations about how we can help to grow what is a big category for them as a customer. We want to be important in that as they grow their sales in that category and be a bigger player in that. Obviously, having more product going into the same stores allows us from a merchandising aspect to benefit overall sales, to have more conversations with the buyers, and to grow the overall category.
I think we're just looking to have more presence in tortillas and that subcategory within Walmart, but also within just the overall salty snack category.
Okay, one follow-up. Obviously, this has been a great year for this business with sales up 30%. When you figured out what kind of multiple you wanted to pay for it, did you consider paying closer to what 2019 sales and EBITDA might have been? Because some of the sales may be temporary.
Yeah, I'll let Cary follow in behind me. I think that they have, like many in the food industry, they have great exposure to mass and club. They're in extremely fast-growing subcategories. Tortillas is a $6 billion category, and they're a large part of it. Tortillas grew a lot. I think there's obviously benefit, and we've noted that in our documents, to the rise in sales in 2020 due to COVID. This is a company that's been growing really over time for almost 30 years. I think they have a great innovation arm. They have a lot of future innovation coming.
Sure, when we looked at it, we sort of looked at 2018, 2019, 2020, what the earnings growth was, what the sales growth was, how much we thought were from new customer wins, how much we thought were from COVID related, and then did the math to try to figure out what would make sense for us economically. As you can see, based on just the multiples that we are paying for this, I think it's a win-win for all parties. Essentially, we're buying it at a great multiple, we believe, and it has a lot of future opportunities. I'll let Cary jump in real quick if I missed anything there. We think that we're factoring in sort of the near-term bump in sales that is due to COVID.
Yeah, I don't have a lot to add to that, Dylan. I think we, of course, did look at the history when coming up with valuation. Very happy with the multiple. The growth we're seeing this year is due in part to COVID, certainly. They are also getting new distribution and rolling out innovation that would've grown the business meaningfully outside of COVID. It's a combination of really new distribution, new innovation, and COVID. They're seeing new buyers into their brand, just like Utz is. They're seeing significant increase in new buyers, especially in the grocery channel, where it's really started to take off. We feel good about the long-term growth potential for the business.
Okay. Just in case nobody else asks, borrowing rate that you would expect on this debt, and how does it compare to your borrowing rate currently if you're paying on your current debt? W ill you have something to chime in on that?
Yeah, we're still thinking through all the financing options available to us. To the extent, the debt piece of the funding, it won't be too dissimilar to what we're incurring now on our term loan. There's a couple different debt capital markets available to us. Rates are very strong, markets are very strong. Depending on what the ultimate structure looks like will obviously determine the rate. We're looking at very competitive rates to where we are today.
Does that mean that equity is still a possibility or not?
Yeah. We're looking at all options. We're looking at all capital structure options.
Your next question comes from the line of Rupesh Parikh with Oppenheimer. Rupesh, your line is open.
Hi, good morning. This is actually Maddy Stone on Rupesh. Thanks for taking our question. As you look at the sales growth rate going forward, how should we think about the growth rate in coming years for the ON THE BORDER brand? Just as you look at different opportunities across the product categories, how do you think about the growth rates between these different categories and where do you see the biggest upside over time?
Yeah, this is Cary. Hey, Maddy. Great question. Growth. No, we expect fairly steady long-term growth out of this brand. If you look at the history, right, prior to this year, over 2015 to 2019, they had a CAGR of about 6% based on retail sales, in mass, overall combined mass, food, and club. It's been a nice grower over time. We expect to continue to be a nice grower. We'll announce 2021 guidance, obviously in March of next year. The business is definitely healthy and growing. They have a lot of white space in grocery. They have channels they really haven't penetrated at all with respect to value and C-store, drug, and even at Walmart, and Sam's Club, which are two big customers. They continue to add new SKUs and grow. It's gonna be a healthy long-term growth rate.
I would expect probably, grocery certainly has more white space. Probably a higher growth rate there, but pretty steady growth, I think could be expected at Walmart in mass and club, and there are some mass customers they don't have today, like Target. There's a club customer they don't have today in Costco, so there's still other new customer opportunities in those channels as well.
Hey, Maddy, this is Dylan, just sort of playing on top of that. One of the data points that I think is really interesting as it relates to growth is the fact that, currently, you can either look at the 86% or you can look at the 14%. 14% of their sales currently are in what we call our core markets. I liken that's a big growth opportunity for us to increase that because of our strength in our core to take those brands, and push them across where we are very strong. Conversely, the 86% is where 86% of their sales are in the emerging and expansion market.
It also has sort of abilities for us to sort of cross-pollinate sales techniques and selling, where we can get sort of Utz Power Brands across a wider spectrum based on some of the retailer relationships and routes to market and distribution avenues that they have as well. We really look at the combination of this as complementary and bringing a lot more brands to a lot more geographies across the U.S.
Okay, great. That's helpful. Thanks so much. I'll pass it on.
Your next question comes from the line of Brian Holland with D.A. Davidson. Brian, your line is open.
Thanks. Good morning, congrats on the acquisition. Maybe just first question, I think you talked about this is a business you've been tracking for a while here. Just curious, the process through which this asset came available and then just also the source of the synergies. Just trying to get a sense of where those are coming from. It sounds like maybe that's just simply bringing the manufacturing in-house. Maybe if you could just give us a little more detail behind those.
Yeah, let me hit on the process, and I'll let Cary touch on some of the source of synergy. From the process, it's very, without going into too many details, very normal process where it was owned by a PE firm that is very well known for developing companies and building them. I think they owned it for, I may have this wrong, but I think they owned it for six or seven years, which is sort of a standard, typical timeframe for a PE firm to own it. They did a lot of great things over those six or seven years, building the brand and establishing great innovation and bringing in great management. It was just a traditional sort of process where we bid against other companies, and eventually we're able to secure a successful outcome.
I'll turn it over to Cary just to talk a little bit about the synergies.
Yep. Hey, Brian. The synergies of five, we feel good about that number. We think that's conservative. It actually is some cost of goods sold and kind of the raw material purchasing area as well as just SG&A. It does not include any insourcing of production into our footprint. That's certainly something we will look at post-closing, but they have a really good co-man network that's managed very well, and their volumes obviously are quite material. We're gonna keep that in place. Over time, we can look at if it makes sense to bring some into our plants. It also does not include any revenue synergies, as a result of selling their products in DSD and things like that.
Yeah, Brian, really thinking about this as future growth and synergies from growth and opportunity. I think when you take something as large as they are, and they are extremely profitable, they are extremely well run. There's a lot of opportunity there that we can actually learn a lot within our organization, just in terms of logistics and manufacturing. We're really looking at sort of as we mesh the two organizations over time together how we can find synergies. I think we're trying to be very conservative and very under-promise, over-deliver, because we want this entity to continue to do what it's been doing. It's been growing. It has a great pipeline for 2021 for sales and innovation.
We don't want to mess anything up, we want to work closely with their management team, let them do what they're doing, learn from them, et cetera, just to make a better combined organization. We're being very conservative, I think, on synergies on purpose.
Yeah. No, perfect. That's exactly what the aim of the question was, so very helpful. Tacking ON THE BORDER onto your business' core strength, fairly straightforward. Maybe if we take it from the angle of the other direction here, can you sort of talk about from your operationally sales, distribution route to market, are you effectively positioned and how do you improve or increase upon that, if not yet, to leverage the strengths that you referenced ON THE BORDER brings to your portfolio geographically, et cetera? What more needs to be done there so that you can fully leverage where this brand is strong and take your Utz Power Brands and expand into those markets? Thanks.
Yeah. Thanks. A lot of it is, what I think is fantastic is that Utz's platform, I think, we've spoken with many of our investors and analysts over the last couple of months about our platform, about our ability to acquire and integrate businesses and really get down to doing the basics of running a business and doing it well. As you know, we acquired Golden Flake in 2016. We had Inventure in 2017. We acquired Conagra's DSD assets in 2019. Our team, our associates, our platform is really built, I think, well to integrate these companies. What we do is we run it through a process. We will start to break down. Of course, we need to wait until HSR and to get past the next, 30+ days to pass our HSR, hopefully.
We break it down into a process where we're really looking at every aspect of it. Are there savings on procurement? Are there distribution opportunities, channel by channel, geography by geography? Take a state like Alabama or Mississippi or Georgia or Florida, South Carolina. There are opportunities down there that we can almost immediately begin retailer conversations to bring this fantastic brand to those markets in which it's not as strong today, but we can bring the brands into food and grocery, where again, they're not as strong today, but we are very strong.
It's just really ticking and tacking through a whole sort of project management, PMO type of list of 50 - 100 different things that just create work streams, and we start effectively working on them on day one to accelerate the combination and bring the businesses together so that we grow sales and grow profits and take share in the industry as much as we can in a very sustainable long-term way.
Your final question comes from the line of Michael Lavery with Piper Sandler. Michael, your line is open.
Good morning. Thank you. I think you've highlighted really well how complementary it is. Just curious, you've called out in your core markets, you've got nearly twice your national share at close to 7.5%. What does their share look like in their core markets, which, if I'm hearing it correctly, are just about the exact opposite of yours? Just a little sense of what the headroom is as far as even some low-lying fruit.
Yeah. Cary.
Hey, Michael, look, they're really strong in areas we're not, right? Expansion and emerging. They are good in Texas, the Midwest, places like Michigan and Illinois, Florida, Missouri. Their shares are gonna be obviously meaningfully higher in expansion and emerging than they are in the core, right, which was as we define our core. They're mostly DTW. I'd say over 80% of their route to market is DTW, and then they use third-party distributors for the rest. I think that's where a good synergy for us comes into play is, the eastern part of the country where we're really strong and we have that higher share. They're relying on third-party distributors to access that, and they're not doing it in a meaningful way. We think there's really good upside.
They also have good sales presence in California and the West Coast, which obviously is a growth opportunity for us as well.
Can you quantify their share of either salty snacks or tortillas in those regions?
Regions, roughly, I don't have it on my fingertips, but I can get back to you on that, Michael.
Okay. Just curious with Tortiyahs!, obviously in your portfolio as well, does this change how you think about expanding or pushing that brand? How would they sort of interplay or coexist?
Yeah. Hey, Mike, this is Dylan. I think not at all. I think that Tortiyahs! is a premium, more craft type of brand. This is more of ON THE BORDER is more of a authentic Tex-Mex type of brand. Very similar to the fact that we, as an organization, as a brand platform, have Utz brand potato chips, we have Zapp's brand potato chips, we have Hawaiian Brand potato chips, we've got Tim's Cascade brand of potato chips, we've got Dirty Potato. I mean, we've got a lot of different potato chips. Each of these brands serves a purpose, and each of them sort of serves in some cases, a specific channel or they're multi-channel. I mean, many CPG companies, including ourselves, are able to have multiple brands within a subcategory that fit different sort of customer needs. We'll continue to drive Tortiyahs!.
It's on a very fast growth spectrum, as you know, today. It's only expanding every day in terms of ACV and sales and velocity. This is just a complement to it. Really what's important, I think, is that we set out in our SPAC investor merger documents to talk about the fact that we had two kind of holes in our subcategory portfolio that if you looked at the entire snack category and we're very strong in potato chips, yes, we're very strong in pretzels, yes, we're very strong in cheese, we're very strong in pork rinds, and we had two holes in our portfolio, and one of those was tortillas, and one of those was popcorn. This is really attacking that hole in tortillas, bringing a lot greater strength to our overall portfolio.
Tortillas, as I said earlier, it's a $6 + billion-dollar category that's growing very fast. This just sort of jumps us right into the fray of being a meaningful player within tortillas, and we will integrate that over time into our broader portfolio. It increases our scale, obviously, across the U.S. from a number four to number three. If you went back to some of those investor presentations and kind of just ticked and tacked again through what we said we were gonna do as an organization as we go forward, this is really just right in the middle of the fairway on our strategy and what we said we were going to do. It's adding value, I think, to our overall company. It's increasing our margins into the upper mid-teens on an EBITDA sales basis.
It's increasing our scale and relevance across the entire company and in the entire salty snack, but also in the subcategory of tortillas. I think it's dead on for making sense for us as an organization and one of the reasons why we've been literally pursuing this for years.
Michael-
Go ahead.
I'm sorry to jump in. I was just gonna give you some numbers on your other question.
Oh, sure.
If you look at, and this is as a percentage of the total market, so it's not just tortilla chips, it's all salty products, but their expansion markets are about 1% share. Merging's a little bit higher than that, like 1.1%, 1.2%. Core, as we define it, is 30 basis points. Their share in core is about 1/3 of what it is in the other geographic regions.
Oh, that's really helpful. Thank you. If I could just sneak in one quick last one, too, on the licensing they were paying. You've now bought those intellectual property rights. The margins on this business are already very high and accretive to you, but does that dynamic change? How does that work? Would you amortize those so that it's a wash, or is that a margin boost from not having those licensing fees now?
Yeah. It's already baked into the numbers. The $50 of EBITDA estimated for 2020 includes assumed that royalty expense didn't exist, so it's already baked into the number.
This concludes our question- and- answer session. I will now turn the call back over to Dylan Lissette for closing remarks.
In closing, I do wanna thank everybody for participating in today's call. We're very excited to partner up with the management team at Truco Enterprises on this transaction. Of course, we're waiting for the HSR and the governmental approvals to move forward, but I do wanna thank everybody for joining us today. We're very excited about this transaction and the announcement of the transaction, so thank you very much.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.