TreeHouse Foods announced that it has signed a definitive agreement to acquire certain subsidiaries that operate the private brand tea business of Harris Freeman & Co, a leading private brand tea manufacturer in the U.S., for approximately $205 million, subject to customary purchase price adjustments.
"The acquisition of Harris Tea strengthens our competitive positioning in the fast-growing tea category and adds unique blending and sourcing capabilities that customers desire, building upon TreeHouse Foods' category leadership, enhancing our position through additional depth and scale," said Steve Oakland, Chairman, Chief Executive Officer, and President. "This acquisition aligns with our long-term strategy to build capabilities in our higher-growth, higher-margin categories," he added.
The acquisition includes Harris Tea's manufacturing facilities in Moorestown, New Jersey, and Marietta, Georgia, and TreeHouse Foods will welcome approximately 300 Harris Tea team members. The acquisition of Harris Tea will provide vertical integration across the company's existing tea business, and will be accretive to the company's overall growth and margins, a press release stated.
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. This transaction is expected to close in the first quarter of 2025 and will be funded primarily with cash on hand, and fully satisfies the company's obligation under its bond indenture to either reinvest certain proceeds from the previously completed Meal Preparation sale or retire debt. Upon closing, the company expects its leverage ratio to be within its target range of 3.0x to 3.5x. Finally, 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.
"The tea category presents significant opportunity for future growth," said Kevin Shah, Co-CEO of Harris Freeman. "It was clear that TreeHouse Foods would provide a great fit for our next chapter of growth, given its depth of capabilities, scale, industry expertise, and customer relationships, and I am confident we will maintain our upward trajectory as a result of this transaction."
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