ConAgra To Sell Private Label Operations to Treehouse

By Dave Fusaro, Editor in Chief

Nov 02, 2015

ConAgra Foods Inc. on Nov. 2 announced a deal to sell its private label business, largely what used to be Ralcorp, to private label powerhouse TreeHouse Foods for approximately $2.7 billion in cash. The purchase will more than double TreeHouse's size, making the Oak Brook, Ill-based company a $7 billion firm almost entirely devoted to private label.

A previous administration at ConAgra bought Ralcorp for $6.8 billion in November 2012, following an 18-month pursuit.

“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 Pres/CEO Sean Connolly.

Sam Reed, chairman and CEO of TreeHouse, noted, "The union of TreeHouse and ConAgra's private brands business establishes an industry leader in customer brands and custom products with significant scale, scope and skill and enables us to extend our reach in the grocery store by over 10 shelf stable and refrigerated food categories."

Ralcorp has had a checkered history, although at the time of the 2012 purchase by ConAgra it still was the country's largest private label manufacturer, just outpacing TreeHouse. Also, ConAgra had built up a significant private label business of its own.

Ralcorp traces its roots back to the Ralston and Ralston Purina companies, and it owned Post cereals until it spun that business off into a separate company as a poison pill to avoid acquisition by ConAgra. It didn't work: ConAgra ultimately paid more than it originally offered for a significantly smaller company.

The closing is anticipated in the first quarter of 2016.

“Today’s announcement follows a robust sale process involving more than 35 potential buyers, including both strategic buyers and financial sponsors," said Connolly, who has been ConAgra's CEO just since April and who promised to fix what the previous administration had done. "This transaction will enable ConAgra to sharpen our focus and resources on our Consumer Foods and Commercial Foods segments as we continue to move quickly to drive sustainable growth and deliver enhanced shareholder value.”

The sale includes a network of 32 manufacturing facilities in the U.S., Canada and Italy. ConAgra will retain certain private label operations with a strong 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.

"The acquisition of ConAgra's private brands operations will meaningfully expand TreeHouse's presence in private label dry and refrigerated grocery," the acquirer said. "The private brands operations had sales of approximately $3.6 billion for the 12 months ended May 31, 2015. Following the acquisition, TreeHouse will have pro forma sales of nearly $7 billion and adjusted EBITDA [earnings before interest, taxes, depreciation, and amortization] of approximately $690 million. Upon closing, TreeHouse will have more than 50 manufacturing facilities and over 16,000 employees."

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