(Reuters) - Canadian organic foods supplier SunOpta Inc SOY.TO (STKL.O) said it would buy organic frozen fruit supplier Sunrise Holdings Delaware Inc for about $450 million in a move to strengthen its packaged products business.
SunOpta, which also sells agricultural produce and food ingredients, said it was buying Sunrise from a group of investors led by private equity firm Paine & Partners LLC.
Demand for organic food, from fruits to meat, has risen steadily in the last decade as consumers become more concerned about genetically modified crops and chemicals used in the food chain.
"From a strategy perspective, I think (the deal) is a solid move," said D A Davidson & Co analyst Eric Gottlieb.
The deal will help SunOpta become the U.S. leader in the "individually quick-frozen organic food" business, Gottlieb told Reuters.
Individually quick-frozen foods do not stick together as a block, making foods such as strawberries and blueberries easier to use.
"It is a niche area that is growing at a very high rate," Gottlieb said.
Consumer packaged products will now account for more than half of SunOpta's business, the company said. The unit contributed 38 percent to SunOpta's total revenue in 2014.
Sunrise, with annual revenue of about $300 million, has retail and food service facilities in California, Kansas and Mexico.
The deal comes four months after SunOpta said it would buy a private organic and conventional orange juice supplier for $13.3 million.
SunOpta, which has a market value of about C$915 million ($702 million), in May reported a 9 percent rise in first- quarter revenue, helped mainly by stronger demand in the United States and Europe.
The Sunrise deal is expected to add 10 cents to SunOpta's adjusted earnings per share in fiscal 2016.
Sunrise Chief Executive Ed Haft will lead SunOpta's frozen fruit operations after the closing of the deal, expected in the fall of 2015. All of Sunrise's existing employees will join SunOpta.
Citi served as SunOpta's financial adviser. Faegre Baker Daniels LLP and Simpson Thacher & Bartlett LLP were the company's legal advisers.
Brampton, Ontario-based SunOpta's shares were up about 1.3 percent at C$13.62 at midday on the Toronto Stock Exchange. The U.S. stock was up 1.4 percent at $10.45.
Up to Thursday's close, SunOpta's Toronto stock had fallen 2 percent this year, while the Nasdaq-traded stock had risen nearly 13 percent.
Additional reporting by Darshana Sankararaman; Editing by Maju Samuel