Treehouse Foods has completed the purchase of Del Monte’s private label soup and infant food business for US$268m in cash plus an adjustment for working capital.
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The soup business is the market leader in the private label wet soup category. It manufactures and distributes condensed soup, ready-to-serve soup, broth and gravy to supermarkets and mass merchandisers for sale under the retailers’ own label. It has an estimated 70% volume share of private label soup, which in turn has a 10% penetration in the wet soup category.
The Nature’s Goodness infant food business is the third largest in its sector in the US.
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“The purchase of the private label soup and infant feeding business is a great fit for our go to market strategy. We see opportunities to create operational efficiencies and to deliver top line growth due to our focus on private label foods,” said Sam Reed, chairman and chief executive officer.
The sale includes Del Monte’s manufacturing facility and distribution centre in Pittsburgh, Pennsylvania and certain manufacturing assets associated with the private label soup business located at the Mendota, Illinois facility.
Del Monte has entered into a co-pack agreement for TreeHouse to produce broth in the Pittsburgh facility for Del Monte’s College Inn broth business, which business was not part of the sale. TreeHouse has entered into a long-term lease agreement at Del Monte’s Mendota facility, where the Company will continue to produce vegetable products.
“This transaction, which was an important step in the company’s implementation of Project Brand, will enable us to enhance shareholder value by increasing the branded focus of our product portfolio and accelerating innovation-driven organic growth in higher margin categories,” said Rick Wolford, Del Monte’s chairman and chief executive officer. “This sale allows Del Monte to focus our innovation initiatives and financial resources on building our branded businesses, including the Meow Mix and Milk-Bone equities following the completion of those acquisitions.”
