- TreeHouse Foods is selling its snacks division to private investment firm Atlas Holdings for $90 million, according to a release. The deal is expected to close in the third quarter of 2019.
- The division is one of the biggest manufacturers and distributors of private label healthy snacks in North America. TreeHouse predicted the division would bring in net sales of about $670 million in 2019.
- The division employs 800 workers and currently operates three plants in North Carolina, Texas and Alabama. A fourth plant in Minnesota is scheduled to close this year, impacting 120 jobs.
After another difficult year of plummeting sales and job cuts, TreeHouse is continuing to cut costs by selling this division. But it isn't surprising news. When the company announced plans to close the Minnesota facility, it said the division continued to underperform and a strategic review of its premium nuts and trail mix business was underway.
TreeHouse has been reportedly shopping around its to sell its trail mix segment, which has been a drag on earnings, since late last year. In its most recent earnings report, the company's $1.3 billion revenue declined 12% from last year, part of which was driven by volume loss in its snacks division. Steve Oakland, CEO and president of TreeHouse Foods, called the division's financial performance "challenging" and "disappointing" in a May earnings call.
"The sale of the Snacks Division is a key step in optimizing TreeHouse's overall product portfolio," Oakland said in the release announcing the deal.
TreeHouse has long been working to streamline its underperforming snacks operations. As the division has struggled to lift sales, plants have closed. In addition to the Minnesota facility, the company also announced last year it would close a pretzel and snack plant in California by the end of the first quarter of 2019, impacting nearly 300 workers.
Atlas will pay $90 million for the portfolio of premium nuts, trail mixes and other healthy snacks, which has with expected sales of $670 million in 2019, according to TreeHouse's projections. This could be a lucrative acquisition for Atlas if the division performs better — or they can resell it for more money.
Given that TreeHouse paid $860 million to buy the business formerly known as Flagstone Foods in 2014, Atlas seems to have gotten a good deal with potential for growth. Private label remains a profitable business, with U.S. retail sales dramatically increasing in 2017 to $138 billion, according to a report from the Food Marketing Institute and IRI.
This sale follows the company's mission to refocus its business. Last year, TreeHouse hired a new CEO. The company is also working through a restructuring plan. Oakland has led the company for about a year now, and the private label food manufacturer has continued that mission by closing plants, further reducing its SKUs and changing how it thinks about business in order to reverse a multi-year decline in sales.
It is also divesting brands that do not fit with its core private label mission, and the snacks sector was not the first cut. In May, TreeHouse announced it had reached an agreement to sell its ready-to-eat cereal business to Post Holdings. TreeHouse plans to use the net proceeds of this latest sale to pay down debt and help get the company back on track.
The acquisition is an interesting one for Atlas Holdings, which owns several other businesses in very different sectors. Other holdings include building materials — including plywood mill New Wood Resources — New Hampshire-based power company Granite Shore Power, and steel companies under the BF Holdings banner. Some of Atlas's companies are in the food packaging business, but not food manufacturing or CPGs. It will be interesting to see what this owner plans to do with the snacks division, and if it's going to become the next private equity power player in the food business.