TreeHouse Foods Inc. agreed to buy ConAgra Foods Inc.’s private-label unit for $2.7 billion, creating the largest U.S. maker of store-brand groceries.
The purchase will reduce earnings per share by as much as 35 cents a share the first year after the acquisition, then add as much 70 cents a share to profit the second year, Oak Brook, Illinois-based TreeHouse said in a statement Monday. The acquisition is expected to close in the first quarter, the company said.
The purchase will significantly bulk up TreeHouse’s operations, expanding it to more than 50 manufacturing facilities, 16,000 employees and more than doubling its annual sales to almost $7 billion. For ConAgra, the deal rids it of a division that has weighed on earnings since it was purchased from Ralcorp for about $6.7 billion in 2013.
TreeHouse has largely built its business through acquisition since it was spun off from Dean Foods in 2005. In those 10 years, the company has completed 13 deals with a total value of about $2.7 billion, according to data compiled by Bloomberg.
TreeHouse said it will fund the ConAgra takeover with $1.8 billion in new debt and $1 billion in stock issuance.
ConAgra’s Struggles
ConAgra Chief Executive Officer Sean Connolly announced plans to sell the private-label business in June, only three months after taking the job. The Omaha, Nebraska-based company had struggled with the business, hurt by management missteps and an overreliance on products in struggling categories.
The company also had been pressured by activist investor Jana Partners, which criticized ConAgra’s handling of the unit.
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