TreeHouse Foods, Inc.
) is in advanced talks to acquire Flagstone Foods -- a
Minneapolis-based maker of dried fruits and nuts -- for around
$800-$900 million. TreeHouse has reportedly truimphed over a
Chinese group at the auction for Flagstone. TreeHouse expressed its
interest in buying Flagstone in May.
This IL-based food manufacturer is on an acquisition spree and
has expanded into new categories and markets. In fact, TreeHouse
has acquired around six food companies in the past four years.
On May 30, the company completed the all-cash acquisition of
Protenergy Natural Foods, which was announced on Apr 21, for
approximately $150 million (CAD $170 million). Protenergy Natural
Foods is an industry leading developer and manufacturer of premium
quality food and beverage products. Besides adding items such as
soups, broths, and gravies to TreeHouse's portfolio, the
acquisition will also add $200 million in revenues.
Also, TreeHouse will leverage the potential of Protenergy to
bolster its private-label soup offerings and gain access to the
private-label category. The company is tweaking its packaging from
steel cans to re-sealable cartons and is also introducing tetra
packs. Moreover, the combination of these companies will focus on
delivering innovative and quality products. The deal will
positively impact the company's 2014 earnings by approximately 5
cents to 7 cents and also benefit 2015 earnings by approximately 11
cents to 14 cents.
These acquisitions have played an important role in pulling up
the revenues of the company. Recently, the company reported its
first quarter 2014 results. Adjusted earnings increased 8.1% from
the prior year quarter and revenues grew 14.6%, driven by
acquisitions of Cains Foods and Associated Brands, made last year.
The company's top-line growth was also driven by single-serve
coffee and productivity gains. We also expect the Flagstone
acquisition, if it happens, to improve TreeHouse's performance
However, the company needs to be careful with its acquisitions
as both Cains Foods and Associated Brands have lower margins,
thereby creating margin pressure.
TreeHouse carries a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other better-ranked companies in the food industry include
The Hain Celestial Group, Inc.
Inventure Foods, Inc.
). While BRF S.A. and Hain Celestial carry a Zacks Rank #1 (Strong
Buy), Inventure holds a Zacks Rank #2.
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