TreeHouse Buys Associated Brands

Zacks

Ill.-based food manufacturer TreeHouse Foods, Inc. (THS) is on an acquisition spree and has been expanding into new categories and markets.

On Oct 8, TreeHouse acquired Associated Brands from TorQuest Partners LLC and other shareholders for 187 million Canadian dollars (approximately $180 million) in cash. The buyout is expected to expand TreeHouse’s retail presence in private-label dry grocery. The transaction will be financed through borrowings under TreeHouse's existing $750 million credit facility.

Though the acquisition will not affect 2013 earnings, it will be accretive to 2014 results. The takeover will add approximately $200 million of sales and around 14 cents to 16 cents of earnings per share.

Associated Brands manufactures and supplies private label packaged food products to almost all of the 50 largest North American food retailers. The deal is thus a strategic fit for TreeHouse, which primarily serves the retail grocery and foodservice channels. Moreover, it is complementary as Associated Brands has a strong presence in North America in a number of dry mix categories whereas TreeHouse serves powdered drinks, oatmeal and side dishes. 

Associated Brands’ products will enhance TreeHouse’s product portfolio and help it to launch a line of specialty tea products to complement its fast growing single-serve coffee business.

Prior to this acquisition, TreeHouse acquired privately-owned Cains Foods for $35 million in Jul 2013. The deal is expected to boost TreeHouse’s earnings by 5 cents per share in 2014 with no major impact on 2013 earnings. Mass.-based Cains manufactures mayonnaise, dressings and sauces and fits TreeHouse’s acquisition strategy.

Some recent acquisitions by TreeHouse include the Aseptic cheese and pudding business from Minnesota-based dairy marketing cooperative Associated Milk Producers Inc. in Nov 2012 and Atlanta-based food company, Naturally Fresh, Inc., in the second quarter of 2012. These acquisitions played an important role in pulling up the company’s revenues in the first quarter of 2013, results of which were announced in May this year.

TreeHouse carries a Zacks Rank #2 (Buy). Other stocks in the food business that are currently doing well and are worth considering include Pinnacle Foods Inc. (PF), Omega Protein Corp. (OME) and Green Mountain Coffee Roasters Inc. (GMCR). While Pinnacle Foods and Omega Protein hold a Zacks Rank #1 (Strong Buy), Green Mountain carries a Zacks Rank #2.

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Read the Full Research Report on THS
Read the Full Research Report on GMCR
Read the Full Research Report on OME


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