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TheStreet Open House

The Deal: Treehouse Foods Jumps on Deal

NEW YORK ( TheStreet) -- Treehouse Foods (THS) will acquire powdered drinks, specialty teas and sweetener maker Associated Brands from TorQuest Partners and other shareholders, paying C$187 million ($179.7 million) in cash.

TreeHouse said the deal will expand its retail presence in the private-label dry grocery space, and will introduce a line of specialty tea products to complement its single-serve coffee business.

Mississauga, Ontario-based Associated has about 650 employees and operates three production facilities in Delta, British Columbia; Medina, N.Y.; and Toronto. The company had sales of about $200 million for the twelve months ended June 30, TreeHouse said. Following the acquisition, TreeHouse will have pro forma 2013 sales of about $2.5 billion and adjusted EBITDA of about $350 million.

Toronto-based TorQuest focuses on midmarket companies and has about C$1 billion in equity under management. It bought Associated in 2007 from a C$550 million fund raised a year earlier and later invested in eight businesses. The firm was founded in 2002.

"Associated Brands has a strong North American presence in a number of dry mix categories that are complementary to TreeHouse, such as powdered drinks, oatmeal and side dishes. Through Associated Brands, we will also enter the large and growing specialty tea category," TreeHouse Foods president, chairman and CEO Sam K. Reed said in a statement Thursday morning.

The deal should close by the third quarter. TreeHouse said the transaction would be earnings neutral for 2013, but would add 14 cents to 16 cents in earnings by 2014. The deal will funded through an existing $750 million credit line.

TreeHouse reported second-quarter earnings Thursday, recording $526.3 million in revenue, essentially flat from the same period last year, and $18.6 million in net income, a 4.6% decrease.

Wells Fargo Securities advised TreeHouse on the deal. Winston & Strawn LLP and Stikeman Elliot are serving as legal counsel. BMO Capital Markets advised Associated Brands and TorQuest, with Torys as the legal counsel.

TreeHouse Foods has a market capitalization of about $2.5 billion. Shares were higher in Thursday trading, gaining 4.06%‎ to $74.03.

-- Written by Thomas Zadvydas in New York

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