Australia’s Freedom Foods Group has confirmed it has sold its cereal and snacks division to local peer The Arnott’s Group, which is owned by US private-equity firm KKR, for AUD20m (US$15.2m).
With the Freedom Foods’ brand name will be retained by Arnott’s post-deal, Freedom Foods Group said it now plans to change its corporate name.
Reports in the Australian media, covered by just-food yesterday, had predicted the deal ahead of Freedom Foods Group’ confirmatory announcement today (17 December).
In a filing with the Australian Securities Exchange (ASX), the company said the cereal and snacks division, which makes the Messy Monkeys and Arnold’s Farm brands, had been sold “as part of the ongoing programme to simplify the company’s business structure and product range, improve profitability and prioritise growth opportunities”.
Freedom Foods Group said cash proceeds from the deal are estimated at AUD11m after deducting costs associated with the transaction and associated equipment leases.
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The sale includes the cereal and snacks manufacturing facilities in Leeton and Darlington Point in New South Wales and in Dandenong in Victoria, as well as all brands associated with the business, including Freedom Foods, Messy Monkeys, Heritage Mill, Arnold’s Farm and Barley+.
New York-based KKR acquired Arnott’s from US major Campbell Soup Co. last year.
The deal does not include the Crankt Protein brand, which will remain a part of Freedom Foods Group’s portfolio.
The majority of the cereal and snacks employees will transfer to the new owners, although there are likely to be some redundancies, Freedom Foods Group said.
Michael Perich, Freedom Foods Group’s CEO, added: “We believe the cereal and snacks business will thrive under an owner such as The Arnott’s Group, which is committed to investing in the business and employees to ensure a sustainable and successful future.
“This decision is consistent with the new executive team’s strategy of simplifying both our business structure and product range to ensure we are maximising growth opportunities in dairy and nutritionals and plant-based beverages.”
Arnott’s CEO George Zoghbi said: “This purchase of manufacturing sites and leading consumer brands from Freedom Foods Group will accelerate our strategy of entering new product categories and unlock innovation to benefit customers and consumers.
“Once the purchase is finalised, our domestic manufacturing network will extend across eastern Australia from Virginia in Queensland, Huntingwood, Leeton and Darlington Point in New South wales to Shepparton and Dandenong in Victoria and Marleston in South Australia.”
The transaction is expected to be completed on 1 March.
Freedom Foods Group has had a difficult six months.
It has been undertaking a review of its accounts since August. In June, the company said it was probing the possibility of fraudulent activity after booking write-downs following the departure of senior executives.
Freedom Foods Group has been in talks with funders as part of its efforts to recapitalise the business with a cash injection of at least AUD200m.
An update on the progress of those talks was due this month but that has been pushed back. It is likely that an update on the capital raising will occur in January, the company said yesterday.
A halt in the trading of the company’s shares has also been extended until recapitalisation plans are announced.
The Australian Financial Review newspaper has suggested Freedom Foods Group will still aim to sell its canned seafood business as part of its revamp plans. As well as canned seafood, the Freedom Foods Group portfolio also includes a range of dairy, dairy-free and ingredients businesses.