Do not invest more money than you can afford to lose.
In a conference call with analysts, company executives said the deal would give the combined entity a presence in more than 20 product categories and result in savings in procurement and transportation. The acquisition is expected to close in the first quarter, the company said.
The company will discontinue and divest all businesses related to its private label operations.
ConAgra’s shares jumped as much as 13 percent to $45.86 in premarket trading on Monday. TreeHouse was down 0.2%.
ConAgra planned to install a packaging system upgrade that included machines for vertical pouches and top-load cartons.
The sale to TreeHouse Foods includes a network of 32 manufacturing facilities in the US, Canada and Italy. The deal is valued at $2.7 billion.
Its sales have been consistent and even reached an almost $3 billion earnings last year, although its profits have been intermittent over the past five years. TreeHouse’s shares, flat on the year, were inactive.
TreeHouse dropped to as low as $77.83, the biggest intraday slide since May 7, and fell $4.80, or 5.6 percent, to close Monday at $80.84.
ConAgra, which also makes Hebrew National hot dogs, Jiffy Pop, and Bertolli products, reported a first-quarter loss of $1.2 billion.
ConAgra Foods said it will retain certain private label operations with a connection to its existing Consumer Foods business, specifically canned pasta, cooking spray, peanut butter, pudding/gels, Gelit frozen pasta product offerings, as well as the HK Anderson and Kangaroo brand equity, trademark and business portfolios.
Reed said the acquisition is Treehouse’s 12th and largest, and it more than doubles the size of his business, which was founded 10 years ago. The consensus price target on the stock is $45.00.
“The sale of our private label business marks another important milestone as we remake ConAgra Foods into a focused, higher-margin, more contemporary and higher-performing company”, said Press/CEO Sean Connolly. In its final write-down, the company nixed $1.95 billion from the unit’s value on the company’s books. 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.
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Michael Halen added, “ConAgra has been losing customers due to fact that they cut sales force too deeply, took pricing too bluntly, and suffered supply-chain and customer-service issues”.
