TreeHouse Foods Makes $2.7B Deal for ConAgra's Private Brands Business
TreeHouse Foods announces it has signed a definitive agreement to acquire ConAgra Foods' private brands operations. The acquisition will meaningfully expand TreeHouse's presence in private label dry and refrigerated grocery.
Annual sales of the combined entity will be nearly $7 billion. The transaction is valued at $2.7 billion, and closing is anticipated in the first quarter of 2016. The private brands operations had sales of approximately $3.6 billion for the twelve months ended May 31, 2015. Following the acquisition, TreeHouse will have pro forma sales of nearly $7 billion and adjusted EBITDA of approximately $690 million.
Upon closing, TreeHouse will have more than 50 manufacturing facilities and over 16,000 employees. The union of TreeHouse and ConAgra's private brands business enables the company to extend its reach in the grocery store by over 10 shelf stable and refrigerated food categories.
The Boards of Directors of both companies have approved the transaction, which is subject to the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Competition Act (Canada) and other customary closing conditions.
FINANCIAL TERMS
The purchase price of $2.7 billion is expected to be funded by a combination of $1.8 billion in new debt issuance and approximately$1.0 billion in equity stock issuance. TreeHouse has entered into a committed financing arrangement with its lenders, comprised of a combination of Secured Term Loan A, Secured Term Loan B and Unsecured Bridge facilities. In conjunction with the committed financing, the Company will amend its existing $1.4 billion credit facility to allow for the acquisition and the associated debt incurrence. No additional changes in borrowing costs or other terms are anticipated.
Both the financing and the acquisition are expected to close in the first quarter of 2016. TreeHouse Foods expects to incur approximately $100 million in costs associated with transaction fees and issuance costs.
TreeHouse expects the transaction to be dilutive by $0.20-$0.35 in adjusted earnings per share in year one, to contribute $0.55-$0.70in year two and to be accretive by $1.50-$1.65 in year three. Investments to deconsolidate and integrate the private brands business, combined with the financing costs for the transaction, will exceed contributions from the private brands business in year one. In years two and three, synergies will ramp up significantly, while costs to integrate the business will wind down. Synergies will largely be driven by procurement and supply chain optimization.
Morgan Stanley & Co. LLC and BofA Merrill Lynch are acting as financial advisors to TreeHouse Foods on the transaction and Winston & Strawn LLP is serving as legal counsel to the Company.
Annual sales of the combined entity will be nearly $7 billion. The transaction is valued at $2.7 billion, and closing is anticipated in the first quarter of 2016. The private brands operations had sales of approximately $3.6 billion for the twelve months ended May 31, 2015. Following the acquisition, TreeHouse will have pro forma sales of nearly $7 billion and adjusted EBITDA of approximately $690 million.
Upon closing, TreeHouse will have more than 50 manufacturing facilities and over 16,000 employees. The union of TreeHouse and ConAgra's private brands business enables the company to extend its reach in the grocery store by over 10 shelf stable and refrigerated food categories.
The Boards of Directors of both companies have approved the transaction, which is subject to the expiration or termination of applicable waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, the Competition Act (Canada) and other customary closing conditions.
FINANCIAL TERMS
The purchase price of $2.7 billion is expected to be funded by a combination of $1.8 billion in new debt issuance and approximately$1.0 billion in equity stock issuance. TreeHouse has entered into a committed financing arrangement with its lenders, comprised of a combination of Secured Term Loan A, Secured Term Loan B and Unsecured Bridge facilities. In conjunction with the committed financing, the Company will amend its existing $1.4 billion credit facility to allow for the acquisition and the associated debt incurrence. No additional changes in borrowing costs or other terms are anticipated.
Both the financing and the acquisition are expected to close in the first quarter of 2016. TreeHouse Foods expects to incur approximately $100 million in costs associated with transaction fees and issuance costs.
TreeHouse expects the transaction to be dilutive by $0.20-$0.35 in adjusted earnings per share in year one, to contribute $0.55-$0.70in year two and to be accretive by $1.50-$1.65 in year three. Investments to deconsolidate and integrate the private brands business, combined with the financing costs for the transaction, will exceed contributions from the private brands business in year one. In years two and three, synergies will ramp up significantly, while costs to integrate the business will wind down. Synergies will largely be driven by procurement and supply chain optimization.
Morgan Stanley & Co. LLC and BofA Merrill Lynch are acting as financial advisors to TreeHouse Foods on the transaction and Winston & Strawn LLP is serving as legal counsel to the Company.