Ladies and gentlemen, thank you for standing by, and welcome to the Utz Brands Inc. 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 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 UGG 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 Carrie DeVore, Chief Financial Officer, will also be available during the Q and 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 US 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 The company does not provide a reconciliation 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 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 Etsy's 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. And now I'd like to turn the call over to Dylan Lippett.
Thanks, Anna Kate, and hello, everyone. I'm pleased to announce a very important transaction for its brands as we have signed a definitive agreement for the acquisition of Chukko Enterprises, a leader in the United States snack category, which has grown on the border branded tortilla chips, salsas and queso dip into a leading national brand. This is a business that we've been following for some time and the acquisition of Truco Enterprises will be an important step forward in achieving the value creation and M and A objectives that we laid out during our STACK business combination materials and investor presentations. We are very excited to be here today sharing with you the background of this important transaction for Ochs Brands, which will help drive us toward our goal to be the fastest growing pure play branded snack platform of scale in the United States. First, some background on TruCo.
It is a leading independent provider of tortilla chips, salsas, quesars 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 3rd largest brand in the $6,200,000,000 retail sales tortilla chips subcategory, which as a subcategory of salty snacks grew 10% for the last 52 weeks ended October 4 according to IRI. Trigo is asset light with 100% of production outsourced to coke 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 $195,000,000 and Truco adjusted EBITDA of approximately $50,000,000 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-nineteen. Nearly 100% of its sales are in the grocery, mass and club channels, and like which brands, these channels have seen significant growth during the pandemic. The acquisition completely aligns with our value creation and M and A strategies from several perspectives.
First, it will immediately make UGG the number 3 platform in salty snacking with $1,300,000,000 in retail sales, increasing our market share from 3.9% to 4.7% overall. And as we know, scale and product diversification are important success factors in salty snacks. 2nd, it will increase our scale in the attractive tortilla chip subcategory, making Uptown's platform the number 3 competitor in the subcategory with a market share of approximately 4%, which is consistent with our total share in salty snacks before the acquisition. 3rd, it will provide us a meaningful entry into the adjacent salsa and cases subcategories, which are $1,600,000,000 in size combined and are growing at a combined rate of approximately 18%. 4th, it will provide us a significantly expanded channel and geographic presence.
From a channel perspective, it significantly increases our scale in the underpenetrated VAS channel, increasing our share from approximately 2.6% to 4.1%, moving us from the number 4 to the number 3 position in the mass channel. It also significantly increases scale in this current expansion in emerging territories, adding approximately $190,000,000 in retail sales, increasing our exposure to these geographies from approximately 40% currently to approximately 48% of those as retail sales on a combined basis. It's important to note that only approximately 14% of TruthO's retail sales are in our existing core geographies, which truly speaks to the complementary nature of this acquisition. 5th, we believe there's a meaningful channel expansion opportunity. With approximately 60 basis points of share, Treba is underweight in the grocery channel where Oats is particularly strong, and there is a significant amount of white space in the convenience, value and drug channels to pursue.
And 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, OX plus Truka would generate an adjusted EBITDA margin of approximately 16% in 2020, up approximately 200 basis points from what's on a stand alone basis. It presents strong synergy opportunities and identified expected cost synergies of at least $5,000,000 We also expect there to be incremental revenue opportunities, including selling Trupa's products through our DSD network and within our core geographies where again Trupa does not have meaningful current revenue. And it is consistent with our target leverage policy, which is to return to a 3 to 4 times net leverage ratio within 12 to 18 months after closing.
Touching on some of the transaction highlights, the purchase price of $480,000,000 represents an acquisition multiple of approximately 9.2x estimated 2020 adjusted EBITDA of $50,000,000 excluding synergies and 8.4x 2020 adjusted EBITDA, including run rate cost synergies of at least $5,000,000 dollars in each case including $20,000,000 in net present value from expected tax assets resulting from the transaction. This transaction is 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 brands for use in the United States salty snacks market. Since its inception, Treba has licensed Beyond the Border brand from the restaurant group of the same name for use in the Southeast snack category. But 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 OTP on the border trademark within North America, Central America, South America, Europe and certain other international markets. Fitch has the debt financing commitments for the transaction from both Bank of America and Goldman Sachs. And assuming what fully draws these commitments, net leverage immediately following the transaction is expected to be approximately 4.8x combined 2020 adjusted EBITDA, including run rate synergies. And as I noted previously, we currently expect to return to our stated target net leverage ratio range of 3 to 4 times within 12 to 18 months after closing.
And 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 5, we expect combined Oksintrueco net sales of approximately 1.15 $1,000,000,000 to 1.16 $1,000,000,000 in 2020 with adjusted EBITDA of $184,000,000 to 187,000,000 dollars 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 in 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 and 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 and this relationship goes back 25 years. And in grocery, Treco has a number of solid relationships that add up to approximately 35% of total on the border retail sales, including retailers like Kroger, HEB in Texas, Albertsons Safeway and Hy Vee and Meijer in the Midwest. We're 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 and Truco also has a strong offering in salsa and queso, including some exciting new innovations that include salsa, queso and guacamole and a squeeze bottle format. So as you can see, we like the strong customer base that OnTheborder 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 Edge 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 OnTheborder into the future. The acquisition is a meaningful boost to our scale and we will become the clear number 3 scale competitor in the salty snacks sector, in fact, within striking business of this number 2 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, and 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 3 in mass, number 2 in club, number 3 in tortilla chips and number 5 in salsa and even though small, number 3 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 Oats power brands as well. Our geographic and channel mix becomes much more balanced with Beyond 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 brand 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 ITSA Power brand. In channels, On the Border is strong in 3 primary channels, mass, food and club.
This is very complementary to OOPS 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, puts us underweight in math 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 form a mix, we believe there is still room for continued growth. And 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. And this, of course, is something we believe that us 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 pure growth opportunities for the business. And lastly, the acquisition of Trefo has strong margins and cash flow benefits. On a combined basis, we expect adjusted EBITDA of $184,000,000 to $187,000,000 in 2020, including $5,000,000 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.
And when combining that, adjusted EBITDA, less CapEx as a percentage of adjusted EBITDA, increases from the high seventy percentages to a fraction of 85% based on 2020 financials. As 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 of this important transaction for its brand. Cougar Enterprises with its on the boarded brand is an amazing company with great leadership, great people, great products and almost 30 years of continuing 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. Carrie will now join me, and we will open up the floor for questions and answers.
Thank you. Your first question comes from the line of Robert Markow with Credit Suisse. Robert, your line is open.
Hi. Thank you for the question.
I'd like to know if you
could 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? I mean, you mentioned that diversification of tactical examples of that?
Sure. 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 mean, I think there's a couple of ways to look at it.
Walmart is a large customer of TruCo and on the border, They are 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 and many of our CPG competitors are more in the 20% -plus range. So obviously as we ideally grow scale with Walmart as just an important customer, they've been a great customer of Oats' for 20 5 plus years that I've been at Oats and we continue to grow with them. So 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 UGGS brands or our ZZZS 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. So we want to be important in that as they grow their sales in that category and be a bigger player in that.
So 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. So I think we're just looking to have more presence in tortillas in that subcategory within Walmart, but also within just the overall salty snack category.
Okay. And 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 like 2019 sales and EBITDA might have been? Because some of the sales may be temporary.
Yes. I'll let Carey follow in behind me. But I mean 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. I mean tortillas is a $6,000,000,000 category and they're a large part of it and tortillas grew a lot.
I think there is obviously benefit and we've noted that in our documents to the rise in sales in 2020 due to COVID. But I mean 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 feature innovation coming. And so 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.
And as you can see based on just the multiples that we are paying for this, I mean 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. So I'll let Carey jump in real quick if I missed anything there, but we think we're factoring in sort of the near term bump in sales that is due to COVID.
Yes. I don't have a lot to add to that, Ron. I think we, of course, did look at the history coming up with valuation. Very happy with the multiple. The growth we're seeing this year is due in part to COVID, certainly.
But they are also getting new distribution and rolling out innovation that would have grown the business meaningfully outside of COVID. So it's a combination of really new distribution, new innovation and COVID. And they're seeing new buyers into their brand just like Hudson's, they're seeing significant increase in new buyers, especially in the grocery channel, where it's really started to take off. So we feel good about the long term growth potential for the business.
Okay. Just in case nobody else asked,
borrowing rate you would expect from this debt
and how does it compare to your borrowing rate currently depending on your current debt? When will you have some visibility on that?
Yes. We're still thinking through all the financing options available to us. But 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. So there's a couple of different debt capital markets available to us. Rates are very strong.
Markets are very strong. Depending on what the ultimate structure looks like, we'll obviously determine the rate. But we're looking at very competitive rates
to where we are today.
Does that mean that equity is still a possibility or not?
Yes, we're looking at all options. We're looking at all options 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 Ashley Maddison on for Rupesh. So I think if it's the sales growth rate going forward, how should we think about the growth rate in coming years for the on the border brands? And then just as you look at different opportunities across the product categories, how do you think about the growth rate between these different categories and where do you see the biggest upside over time?
Yes, this is Carrie. Hey, Manny. Great question. So 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.
So it's been a nice grower over time. We expect to continue to be a nice grower. We'll see we'll announce 2021 guidance obviously in March of next year. But the business is definitely healthy and growing and 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 2 big customers, they continue to have new SKUs and growth.
So it's going to be a healthy long term growth rate. I would expect probably grocery certainly has more white space. So 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 only have today in Costco.
So there's still other new customer opportunities
in those channels as well. And hey, Matti, this is Dylan. And 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. And so I like them that 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. So it also has sort of abilities for us to sort of cross pollinate sales techniques and selling where we can get sort of its 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. So 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.
And maybe just first question, I think you talked about this is a business you've been tracking for a while here. So 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. But maybe if you could just give us a little more detail behind those?
Let me hit on the process and I'll let Carey touch on some of the source of synergies. I mean from the process it's very, very without going into too many details, I mean very normal process where it was owned by a PG 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 6 or 7 years, which is sort of a standard typical timeframe for a PE firm to own it. And they did a lot of great things over those 6 or 7 years building the brand and establishing great innovation and bringing in great management. So it's just a traditional sort of process where we bid against other companies and eventually we're able to secure a successful outcome.
So I'll turn it over to Cary just to talk a little bit about the synergies.
Yes. Hey, Brian. So the synergies of 5, we feel good about that number. We think that's conservative. It actually is it's some cost of goods sold and kind of the raw material purchasing area as well as just SG and A.
So it does not include any in sourcing of the 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. So we're going to keep that in place. And over time, we can look at if it makes sense to bring something to our plants. And it also does not include any revenue synergies as a result of selling their products in DSD and things like
that? Yes, really Brian, really thinking about this as feature 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. So we're really looking at sort of as we sort of mesh the 2 organizations over time together how we can find synergies. And 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 at management team, let them do up. And so we want to work closely with their management team, let them do what they're doing, learn from them, etcetera, just to make a better combined organization. So we're being very conservative I think on synergies on purpose. Perfect.
That's exactly what the aim of
the question was, so very helpful. And then just tacking on the border onto your business' core strengths, fairly straight forward. But 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 Board of Brains to your portfolio, geographically, etcetera? What more needs to be done there so that you can fully leverage where this brand is strong and take your power brands and expand into those markets? Thanks.
Yes, thanks. I mean it's really a lot of it is what I think is fantastic is that Oates' 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. So our team, our associates, our platforms really built I think well to integrate these companies. And 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 plus days to pass our HSR hopefully. But then 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 brands 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. So it's just really ticking and tacking through sort of a whole sort of project management PMO type of list of 50 to 100 different things that just create work streams and we start effectively working on them on day 1 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. And just curious, you called out in your core markets, you've got nearly twice your national share as close to 7.5%. What does their share look like in their core markets, which if I'm hearing it correctly, are just above the exact opposite of yours?
And just a little sense of what the headroom is as far as even some low line fruit?
Yes. So look, they're really strong. They're really strong in areas we're not, right? So expansion and emerging. So they are good in Texas, the Midwest, places like Michigan and Illinois, Florida, Missouri.
So their shares are going to be obviously meaningfully higher in expansion and emerging than they are in the core, right, which was as we define our core. So they're mostly BTW. I'd say over 80% of the route to market is BTW and then they use 3rd party distributors for the rest. And I think that's where 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 3rd party distributors to access that and they're not doing it in a meaningful way.
So 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 at my fingertips, but I can
I'll get back to that on my call. Okay. And just curious with Portillaz 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 Tortilla's is a premium more craft type of brand and this is more of on the board is more of authentic Tex Mex type of brand. Very similar to the fact that we as an organization, as a brand platform have Roetz brand potato chips, we have DAP brand potato chips, we have Hawaiian brand potato chips, we've got Tim's Cascade branded potato chips, we've got dirty potato, I mean we've got a lot of different potato chips. And 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.
But I mean many, many CPG companies including ourselves are able to have multiple brands within a subcategory that fit different sort of customer needs. So we'll continue to drive Tortillas. It's on a very fast growth spectrum as you know today and it's only expanding every day in terms of ACV and sales and velocity. And so this is just a complement to it. And so 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 2 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 2 holes in our portfolio and one of those was tortillas and one of those was popcorn.
And so this is really attacking that hole in tortillas, bringing a lot greater strength to our overall portfolio. And tortilla is a as I said earlier, it's a $6 plus 1,000,000,000 category that's growing very fast. And so 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 United States from the number 4 to number 3.
And so if you went back to some of those investor presentations and kind of just ticked and tacked again through what we said we were going to 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 and it's adding value I think to our overall company. It's increasing our margins into the upper mid teens on an EBITDA to sales basis. It's increasing our scale and relevance across the entire company and the entire salty snack, but also in the subcategory tortillas. So 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 was going to Scott, I'm sorry to jump in. I was just going to give you some numbers on your other question. This is as a percentage of like the total market, so it's not just tortilla chips, it's all salty products, but their expansion is about their expansion markets are about 1% share. Merging is a little bit higher than that. I mean like 1.1, 1.2 and then core as we define it is 30 basis points.
So their share in core is about a third of what it is in the other geographic regions.
That's really helpful. Thank you. And 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 accretive to you.
But does that dynamic change how does that work? Like would you amortize those so that it's a wash? Or is that a margin boost from not having those licensing CDs now?
Yes. It's already baked into the numbers. So the $50,000,000 of EBITDA estimate for 2020 includes assumes 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 Louthat for closing remarks.
In closing, I do want to 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 want to 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.