TreeHouse Foods Divests Meal Prep Business, Focuses on Snacks And Beverages
Illinois-based TreeHouse Foods is selling the majority of its meal preparation business to U.K.-based private equity firm Investindustrial for $950 million, the company announced on Thursday. The portfolio includes many of TreeHouse’s brands in pasta, dressings, sauces, preserves, syrup, dry blends and baking, dry dinners, pie filling, and pita chips.
The deal that is expected to close in Q4 will reduce TreeHouse’s net sales from about $3.5 billion to $1.6 billion. The private-label manufacturer said it will reduce the company’s debt, strengthen its balance sheet and focus its business in the snacking and beverage categories.
The sale will dramatically reduce TreeHouses’ portfolio and retail footprint. Currently, the company is spread across 29 categories with 40 production plants manufacturing about 14,000 SKUs. After the sale, that number will fall to 18 categories with 26 production plants making 9,000 SKUs.
By focusing on a smaller set of categories, it will allow the private label manufacturer to develop more depth in categories like single-serve beverages and crackers. The divestiture will help switch the company’s portfolio from being 60% center-store grocery and 40% in snacks and beverage to the opposite breakdown for the respective categories.
“This transaction enables us to simplify our business and thus improve operational execution, further enhancing our ability to accelerate growth through category depth in our higher growth and margin Snacking and Beverages business,” said Ann M. Sardini, TreeHouse chair of the board of directors, in a press release shared on Thursday.
TreeHouse, the largest private-label manufacturer in the US, has been refocusing its business since Steve Oakland took over as CEO and president in 2018. In July 2019, the company sold its nuts and trail mix business to private equity firm Atlas Holdings for $90 million. Last June, TreeHouse finally offloaded its cereal division to Post Holdings for $85 million after the deal was initially challenged on antitrust concerns by the Federal Trade Commission (FTC).
Oakland said during an investor call that even though TreeHouse is a leader in many of the private-label categories it is selling, those products are “not the same growth and margin profile over time that we think we can be if we focus on snacking and beverage.”
“This is the moment to sell this business,” Oakland continued. “We’re selling into the tailwind of private-label.”
For Investindustrial, the acquisition will boost its reach in the U.S. and strengthen its portfolio of private-label CPG food and beverage brands. The private-equity company also announced that it was purchasing Parker Food Group, a Texas-based specialty, value-added ingredients manufacturer, for an undisclosed amount. These will be the equity firm’s first food companies in the U.S. market.
Speaking to Bloomberg on Thursday, Investindustrial founder Andrea Bonomi said his company was making the unconventional choice to invest in food companies during high inflation because “Food is the biggest challenge that we have on the global economy today.”
“Food will become a central issue,” he continued. “It will be as big as technology I think.”
The sale of the meal preparation business consists of approximately $530 million in cash and approximately $420 million in secured debt to be provided by TreeHouse that are due in 2027.
