But the company had experienced problems with the cost of integration and customer service.
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TreeHouse Foods stock is up 0.42% to $86 in pre-market trading this morning.
TreeHouse said in a statement announcing the agreement that it expects to finance the deal through a $1.8 billion debt issuance and the issuance of $1 billion in stock.
In a conference call with analysts, company executives said the deal would give the combined entity a presence in more than 20 product categories and result in savings in procurement and transportation.
“What we see here is a business that we think is starting to hit the bottom”, said TreeHouse Chief Financial Officer Dennis Riordan, who will become the interim president of the new private label business.
ConAgra planned to install a packaging system upgrade that included machines for vertical pouches and top-load cartons.
Ralcorp has had a checkered history, although at the time of the 2012 purchase by ConAgra it still was the country’s largest private label manufacturer, just outpacing TreeHouse. Annual sales of the combined entity will be almost $7 billion.
ConAgra Foods will retain certain private label operations with a strong connection to its existing Consumer Foods business, specifically canned pasta, cooking spray, peanut butter, pudding/gels, Gelit frozen pasta product offerings, as well as the HK Anderson and Kangaroo brand equity, trademark and business portfolios; the results for these operations, which were not material, were moved to the Consumer Foods reporting segment in the first quarter of fiscal 2016, according to ConAgra Foods.
Sean Connolly, ConAgra’s CEO, said in June that the company intends to sell the private label foods business and focus on its branded products.
TreeHouse has largely expanded through acquisition since it was spun off from Dean Foods in 2005. They’re also not part of the 300 other Omaha jobs that are set to move to Chicago along with the company’s headquarters.
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The deal comes after Jana, which has built a more than 7% stake in ConAgra, criticized the company this summer for its handling of the Ralcorp Holdings Inc. business that ConAgra bought in January 2013. LLC and BofA Merrill Lynch advised TreeHouse Foods, while Goldman Sachs and Centerview Partners were advisers to ConAgra Foods. The Company expects to report earnings per fully diluted share of $0.64-$0.65 compared to $0.47per fully diluted share reported for the third quarter of previous year.
