Treehouse Foods, Inc. (NYSE: THS) has announced the acquisition of certain subsidiaries that operate the private brand tea business of Harris Freeman & Co, Inc. for approximately $205 million. This acquisition will strengthen Treehouse Foods' competitive positioning in the fast-growing tea category and add unique blending and sourcing capabilities. The deal includes Harris Tea’s manufacturing facilities in Moorestown, NJ and Marietta, GA, and Treehouse Foods will welcome approximately 300 Harris Tea team members.
The company has agreed to a purchase price that equals roughly 8.5x trailing-twelve-month adjusted EBITDA, or 6.5x net of synergies and the net present value of future tax benefits. The transaction is expected to close in the first quarter of 2025 and will be funded primarily with cash on hand. This acquisition is expected to provide vertical integration across the company's existing tea business and will be accretive to the company's overall growth and margins.
In addition to the acquisition, Treehouse Foods is reiterating its 2024 full year guidance, including the expectation of sequential improvement in volume growth and profit margin in the fourth quarter. Upon closing, the company expects its leverage ratio to be within its target range of 3.0x to 3.5x.
Furthermore, Wells Fargo Securities, LLC served as the exclusive financial advisor and Holland & Knight served as legal counsel to Harris Tea on the transaction, while Gibson and Dunn served as legal counsel to Treehouse Foods, Inc.
This move demonstrates Treehouse Foods' dedication to building capabilities in higher-growth, higher-margin categories and its commitment to capitalizing on the long-term growth prospects in the categories in which it operates. As a result of these announcements, the company's shares have moved 2.5% on the market, and are now trading at a price of $35.2. For more information, read the company's full 8-K submission here.
