TreeHouse Foods Inc said it would sell a significant portion of its meal preparation business to an investment firm for $950 million (€919.6 million) in a bid to focus more on its private-label snacking and beverage portfolio.
The to-be divested business, which makes pasta, preserves, red sauces and syrup for store-owned brands, is expected to bring in roughly $1.6 billion in net sales and $70 million in adjusted core earnings for 2022, the food distributor said.
US packaged food makers including Kellogg Co and Mondelēz International Inc have been doubling down on their snacking businesses which offer better growth and margins, as Americans stick to snacking habits from the lockdown era.
Demand For Private labels
Surging inflation has also driven up demand for private-label foods as cash-strapped consumers shun expensive national brands in favour of cheaper store-owned labels.
"The positive demand trends for private label are clear and simplifying our business will position us to better capitalise on those trends," TreeHouse chief executive officer, Steve Oakland said in a statement.
"This transaction strengthens our balance sheet, improves execution consistency and accelerates our ability to invest across snacking and beverage categories that present attractive growth opportunities," Oakland added.
The buyer, Investindustrial VII LP, already has a portfolio company that makes private-label foods including preserved vegetables and fruit juices for the European market.
In November of 2020, Spain's Ebro Foods agreed to sell part of its dry pasta and noodles business to TreeHouse Foods in the USA through its subsidiary Riviana Foods.