July 8/Oak Brook, Ill. -- TreeHouse Foods Inc. will acquire Flagstone Foods, a provider of private label healthy snacks, one of the fastest growing on-trend categories in the food industry. TreeHouse has agreed to pay Gryphon Investors and other shareholders $860 million in cash for the business, subject to an adjustment for working capital.
The company expects the transaction to have roughly $0.05 to $0.08 impact on 2014 earnings and add approximately $0.24 to $0.28 in EPS in the first full year following closing. Following the acquisition, TreeHouse's pro forma annual sales are expected to approach $3.5 billion, and adjusted EBITDA should exceed $450 million. The transaction is expected to close during the third quarter of 2014, subject to the satisfaction of customary closing conditions, and is expected to be financed through a combination of borrowings under TreeHouse's existing credit facility and a $325 million equity issuance.
"We are extremely enthusiastic about the acquisition of Flagstone Foods," said Sam K. Reed, chairman, president and chief executive officer of TreeHouse Foods. "Flagstone Foods is ideally situated at the intersection of health and wellness, snacking and the perimeter of the store, and represents an attractive new platform for TreeHouse to enter the on-trend, rapidly growing $7.1 billon healthy snacks category.
Reed continued, "Flagstone Foods has also demonstrated a capability to broaden its product offering with existing customers, to expand into new categories through innovation, and to achieve new customer wins. Over the last three years, the company has seen top line growth of 24% per annum as well as meaningful margin expansion, and has a clear strategy in place to continue its growth trajectory.
"In addition, Flagstone Foods has made great strides in partnering with retailers to merchandise healthy snacks along the perimeter of the store, where consumer traffic continues to grow. This initiative creates incremental and highly profitable sales for its retail partners, and has resulted in a 3-year CAGR of perimeter sales for Flagstone of nearly 50% in the last three years, with little cannibalization of other volume," Reed continued.
"Lastly, we are delighted to welcome Flagstone's CEO Paul Lapadat and his management team to TreeHouse. Paul has done an outstanding job executing upon a clear strategic vision and building a strong culture that we believe will be an excellent fit with the TreeHouse family," Reed said.
"I'm very proud of what we have built to date at Flagstone Foods, and I believe that we are just getting started," said Paul Lapadat, chief executive officer of Flagstone Foods. "By joining TreeHouse Foods, I am confident that we will continue our strong track record of growth. Our management team is among the best, comprised of food industry veterans, and we remain highly focused on delivering innovative and on-trend healthy snacks by both adding new customers and growing and expanding our existing retail partnerships."