TreeHouse Foods has reached an agreement to sell its snacks operations to Atlas Holdings having put the business up for sale last year as the largest private-label supplier in the US seeks to trim its portfolio and boost margins.
The deal price has been set at US$90m, subject to certain closing conditions before the expected completion of the transaction in the third quarter, according to a statement. TreeHouse had anticipated the snacks division would generate sales of around $670m this year.
New York-listed TreeHouse officially confirmed the snacks and trail mixes operations were on the market in December as part of its 2020 strategy to eliminate low-margin categories, increase profit margins and cut debt. In May, the company sold its ready-to-eat cereals unit to peer Post Holdings for an undisclosed sum, and last year divested with its Irish Oatmeal business to B&G Foods for $32m.
Chief executive and president Steven Oakland said: “The sale of the snacks division is a key step in optimising TreeHouse’s overall product portfolio. This transaction allows the snacks division to unlock its potential and serve its customers even better under Atlas’ ownership.”
Atlas, based in Connecticut, owns 19 manufacturing and distribution businesses spread across various industry groups such as packaged food, automotive, construction and power generation. It employs more than 17,000 people across 150 global facilities.
Meanwhile, TreeHouse’s snacks division employs 800 staff at three plants in Robersonville, North Carolina, El Paso, Texas, and Dothan, Alabama. A fourth site, located in Minneapolis, Minnesota, and which makes the nuts and trail mixes for the division, is set to close by the end of the third quarter as previously announced in May.
Michael Sher, a partner at Atlas, added: “This snacks business will be a welcome addition to the Atlas family of manufacturing and distribution companies. Customers are consistently choosing private-label brands, and this business is a premier manufacturer with unique growth potential. We’re excited to partner with this team to deliver the finest, healthy, private-label snacks in the industry.”
TreeHouse, which will use the proceeds from the snacks disposal to pay down debt, said it will update its full-year earnings guidance when it publishes second-quarter results. As it stands, net sales for 2019 are projected to fall to $5.35bn to $5.75bn, with EBIT seen at $290-$325m. Adjusted earnings per share are expected in a range of $2.35 to $2.75 on a diluted basis.
The company’s long-term debt amounted to $2.3bn at the end of the last financial year on 31 December, before the disposal of the cereals unit, according to the annual and fourth-quarter earnings release.