US – In an effort to reduce debt and strengthen the balance sheet, US private-label major TreeHouse Foods has sold a bulk of its meal preparation business to European investment group Investindustrial.
Pasta, dressings, preserves, sauces, syrup, dry blends and baking, dry dinners, pie filling and pita chips are among categories involved in the deal, according to a report by Just Food.
The Illinois company said the divested business is expected to generate net sales and adjusted EBITDA of approximately US$1.6bn and US$70m, respectively, in 2022.
The sale follows an announcement by TreeHouse in November last year where the company revealed that it was looking at “strategic alternatives” that could include “a possible sale of the company.
The company at the time revealed that it was looking for deals that would allow it to focus on its higher growth snacking and beverages business by divesting a significant portion of its meal-prep business”.
This transaction strengthens our balance sheet, improves execution consistency and accelerates our ability to invest across snacking and beverage categories that present attractive growth opportunities.
In March this year, TreeHouse reiterated that it was reshaping its business around “higher growth, higher margin” snacking and beverage operations in a “group of categories”.
The portfolio reorganization sparked rumours – now seen to be well-informed – that TreeHouse was to sell the unit to the investment firm circulated in June.
However, CEO Steve Oakland gave no clue that a unit sale was imminent when speaking to analysts in a post-results call on Monday August 8.
Speaking after the deal was made public , Oakland said: “The positive demand trends for private label are clear and simplifying our business will position us to better capitalise on those trends to drive value now and well into the future.
“This transaction strengthens our balance sheet, improves execution consistency and accelerates our ability to invest across snacking and beverage categories that present attractive growth opportunities.”
London, United Kingdom based Investindustrial said the combined revenues and “global reach” of the business and its portfolio company La Doria, “will create one of the largest suppliers of private-label food products in the world”.
La Doria is a European manufacturer of private-label preserved vegetables, peeled and chopped tomatoes, fruit juices and pasta sauces,
Andrea Bonomi, chair of the investment firm’s industrial advisory board, said: “We understand that success in the food business requires us to provide our customers with the best service as well as high quality products at a great value.
With this acquisition, we will build on our reputation as an industry leader in customer excellence while continuing to improve service levels, product development, and operational efficiencies.”
Following the transaction, which consists of approximately $530m in cash and approximately $420m in senior secured debt, the meal prep business will remain headquartered in Chicago post-deal.
Post-transaction, TreeHouse will have a presence in 18 categories including crackers, non-dairy creamer, pickles, single-serve beverages, refrigerated dough, broth, hot cereals, pretzels, in-store bakery, griddle.
Cookies, bars, cheese and pudding, powdered beverages, tea, other blends, liquid beverages and candy, are the other categories that will remain in the company’s portfolio.
Combined, the categories will have estimated revenues of approximately $3.5 billion and about $330 million in adjusted EBITDA in 2022, according to the company.
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