Attractive Valuation of 13.6x 2022E Adjusted
EBITDA
Simplifies Business, Enables Greater
Management Focus and Improves Consistency of Execution
Creates More Concentrated Higher Growth,
Higher Margin Private Label Snacking and Beverage Business
TreeHouse to Host Conference Call at
8:30 AM ET on August 11, 2022
OAK
BROOK, Ill., Aug. 11,
2022 /PRNewswire/ -- TreeHouse Foods, Inc. (NYSE:
THS) ("TreeHouse" or "the Company") today announced that it has
reached a definitive agreement to sell a significant portion of its
Meal Preparation business (the "Divested Business") to
Investindustrial for $950
million.
"Today's announcement reflects the Board of Director's unanimous
determination that divesting a significant portion of the Meal
Preparation business for $950 million
will deliver greater value for our shareholders than continuing to
operate the divested businesses within TreeHouse," said Chair of
the Board, Ann M. Sardini. "This
transaction enables us to simplify our business and thus improve
operational execution, further enhancing our ability to accelerate
growth through category depth in our higher growth and margin
Snacking and Beverages business."
Steve Oakland, Chief Executive
Officer and President commented, "The positive demand trends for
private label are clear and simplifying our business will position
us to better capitalize on those trends to drive value now and well
into the future. This transaction strengthens our balance sheet,
improves execution consistency and accelerates our ability to
invest across snacking and beverage categories that present
attractive growth opportunities. Our continued focus on commercial
and operational excellence, people and talent, and driving
simplification and growth that have been the hallmarks of our
successful efforts to transform TreeHouse will remain as we
continue our evolution in line with our strategy."
Mr. Oakland continued, "I want to thank all our employees,
particularly the Meal Preparation team, for their commitment
throughout the strategic review process. Investindustrial has a
tremendous track record and significant industry experience that
will be critical to supporting the future success of our colleagues
in the Meal Preparation business as we create robust opportunities
for our Snacking and Beverages team."
TRANSACTION DETAILS
The $950 million transaction value
represents approximately 13.6x times 2022E adjusted earnings before
interest, taxes, depreciation and amortization
("EBITDA")1 for the Divested Business. The transaction
consists of approximately $530
million in cash at closing and approximately $420 million in senior secured debt to be
provided by TreeHouse. The notes are due in 2027 and carry an
initial coupon of 10% for the first two years, escalating to 11%
for the third year, 12% for the fourth year, and 13% thereafter.
The notes are subject to restrictive covenants and are assignable
by TreeHouse.
The Divested Business is expected to generate 2022 net sales and
adjusted EBITDA1 of approximately $1.6 billion and $70
million, respectively. The categories to be divested include
the following: pasta, pourable and spoonable dressing, preserves,
red sauces, syrup, dry blends and baking, dry dinners, pie filling,
pita chips and other sauces.
The proceeds from the transaction will be used primarily to
reduce debt and strengthen the balance sheet. Pro forma for the
transaction and debt paydown, leverage is expected to be below 4.0x
at year end.
The transaction is expected to close in the fourth quarter of
2022 and is subject to customary closing conditions and regulatory
approvals.
Operating results for the categories to be divested will be
reported in discontinued operations beginning in the third quarter
of 2022.
Evercore served as financial advisor to TreeHouse and Gibson
Dunn served as legal advisor. Centerview provided a fairness
opinion to the Board of Directors.
Lazard and Bank of America served as financial advisors to
Investindustrial, and Kirkland & Ellis served as legal
advisor.
____________________
|
1 Adjusted
EBITDA is a non-GAAP financial measure. See "Non-GAAP Financial
Measures" for the definitions of the Non-GAAP measure, and
information concerning certain items affecting comparability. The
Company is not able to reconcile prospective adjusted EBITDA to the
most comparable GAAP financial measure without unreasonable effort
due to the inherent uncertainty and difficulty of predicting the
occurrence, financial impact, and timing of certain items impacting
GAAP results. These items include, but are not limited to,
mark-to-market adjustments of derivative contracts, foreign
currency exchange on the re-measurement of intercompany notes, or
other non-recurring events or transactions that may significantly
affect reported GAAP results.
|
CONFERENCE CALL WEBCAST
A webcast to discuss today's announcement will be held at
8:30 a.m. Eastern Time today. The
live audio webcast and a supporting slide deck will be available on
the Company's website
at www.treehousefoods.com/investors/investor-overview/default.aspx
ABOUT TREEHOUSE FOODS
TreeHouse Foods, Inc. is a leading manufacturer and distributor
of private label foods and beverages in North America. We operate in 29 product
categories across two divisions and have approximately 40
production facilities across North
America and Italy. Across
our diverse portfolio, we offer better-for-you, natural and organic
products and hold a private label leadership position across many
of our categories. Our purpose is to make high quality food and
beverages affordable to all. Our vision is to be the undisputed
solutions leader for our custom brands. Our mission is to create
value as our customers' preferred manufacturing and distribution
partner, providing thought leadership, superior innovation, and a
relentless focus on execution. Our long-term strategic objective is
to build a company that is well positioned to deliver long-term
sustainable growth and create value for our shareholders, as
enabled by our two-segment structure.
Additional information, including TreeHouse's most recent
statements on Forms 10-Q and 10-K, may be found at TreeHouse's
website, http://www.treehousefoods.com.
ABOUT INVESTINDUSTRIAL
Investindustrial is a leading European group of independently
managed investment, holding and advisory companies with €11 billion
of raised fund capital. With ESG principles deeply embedded into
the Firm's core approach, Investindustrial has an over 30-year
history of providing mid-market companies capital, industrial
expertise, operational focus and global platforms to accelerate
sustainable value creation and international expansion. Certain
companies of the Investindustrial group are authorized by, and
subject to regulatory supervision of the FCA in the United Kingdom and the CSSF in Luxembourg. Investindustrial's investment
companies act independently from each other and each
Investindustrial fund. Additional information is available at
www.investindustrial.com.
FORWARD-LOOKING STATEMENTS
This press release contains "forward-looking" statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These forward-looking statements and other information are
based on our beliefs, as well as assumptions made by us, using
information currently available. The words "believe," "estimate,"
"project," "expect," "anticipate," "plan," "intend," "foresee,"
"should," "would," "could," and similar expressions, as they relate
to us, are intended to identify forward-looking statements. Such
statements reflect our current views with respect to future events
and are subject to certain risks, uncertainties, and assumptions.
Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may
vary materially from those described herein as anticipated,
believed, estimated, expected, or intended. We do not intend to
update these forward-looking statements following the date of this
press release.
Such forward-looking statements, because they relate to future
events, are by their very nature subject to many important factors
that could cause actual results to differ materially from those
contemplated by the forward-looking statements contained in this
press release and other public statements we make. Such factors
include, but are not limited to: risks related to the impact of the
ongoing COVID-19 outbreak on our business, suppliers, consumers,
customers, and employees; the success of our growth, reinvestment,
and restructuring programs; our level of indebtedness and related
obligations; disruptions in the financial markets; interest rates;
changes in foreign currency exchange rates; customer concentration
and consolidation; raw material and commodity costs; competition;
loss of key suppliers; disruptions or inefficiencies in our supply
chain and/or operations, including from the ongoing COVID-19
outbreak; our ability to continue to make acquisitions and execute
on divestitures in accordance with our business strategy or
effectively manage the growth from acquisitions; impairment of
goodwill or long lived assets; changes and developments affecting
our industry, including consumer preferences; the outcome of
litigation and regulatory proceedings to which we may be a party;
product recalls; changes in laws and regulations applicable to us;
shareholder activism; disruptions in or failures of our information
technology systems; disruptions resulting from the announcement of
the exploration of strategic alternatives; changes in weather
conditions, climate changes, and natural disasters; labor strikes
or work stoppages; multiemployer pension plans; labor shortages and
increased competition for labor; and other risks that are set forth
in the Risk Factors section, the Legal Proceedings section, the
Management's Discussion and Analysis of Financial Condition and
Results of Operations section, and other sections of our Annual
Report on Form 10-K for the year ended December 31, 2021, and from time to time in our
filings with the Securities and Exchange Commission ("SEC"). You
are cautioned not to unduly rely on such forward-looking
statements, which speak only as of the date made when evaluating
the information presented in this press release. TreeHouse
expressly disclaims any obligation or undertaking to disseminate
any updates or revisions to any forward-looking statement contained
herein, to reflect any change in its expectations with regard
thereto, or any other change in events, conditions or circumstances
on which any statement is based.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA, Adjusting for Certain Items Affecting
Comparability
Adjusted EBITDA represents GAAP net income
(loss) as reported in the Consolidated Statement of Operations
adjusted for items that, in management's judgment, significantly
affect the assessment of earnings results between periods, before
interest expense, interest income, income tax expense, and
depreciation and amortization expense. This information is provided
in order to allow investors to make meaningful comparisons of the
Company's earnings performance between periods and to view the
Company's business from the same perspective as Company management.
As the Company cannot predict the timing and amount of charges that
include, but are not limited to, items such as acquisition,
integration, divestiture, and related costs, mark-to-market
adjustments on derivative contracts, foreign currency exchange
impact on the re-measurement of intercompany notes, growth,
reinvestment, and restructuring programs, the impact of the
COVID-19 pandemic, and other items that may arise from time to time
that would impact comparability, management does not consider these
costs when evaluating the Company's performance, when making
decisions regarding the allocation of resources, in determining
incentive compensation, or in determining earnings estimates.
Adjusted EBITDA is a performance measure commonly used by
management to assess operating performance, and the Company
believes they are commonly reported and widely used by investors
and other interested parties as a measure of a company's operating
performance between periods.
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SOURCE TreeHouse Foods, Inc.