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TreeHouse Foods, B&G Foods to Gain From McCann's Oatmeal Deal


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In an attempt to simplify its portfolio, TreeHouse Foods, Inc. THS concluded the sale of McCann's Irish Oatmeal brand to B&G Foods BGS . The deal, which is expected to have an insignificant impact on TreeHouse Foods' bottom line in 2018, is valued at nearly $32 million. Management plans to utilize the proceeds to repay debt.

TreeHouse Foods added McCann's Irish Oatmeal under its umbrella in 2010, through its buyout of Sturm Foods. The divestiture of McCann's Irish Oatmeal goes in line with TreeHouse Foods' endeavors to streamline its portfolio and put greater stress on private label categories, as they complement the corporate brand efforts of the company's customers.

Apart from undertaking strategic divestitures, TreeHouse Foods has always been focused on enhancing its product offerings through meaningful acquisitions. In February 2016, the company acquired Private Brands Business from ConAgra Foods CAG for $2.7 billion. The Private Brands Business is a leading manufacturer of private label refrigerated and shelf stable products in the bars, bakery, cereal, condiments, pasta and snacks categories.

The addition of Private Brands has added to the revenues and helped the company lower debt. The company's other acquisitions include Flagstone Foods, PFF Capital Group, Inc. ("Protenergy"), Cains Foods, L.P., Associated Brands and Naturally Fresh, Inc. TreeHouse expects to utilize its scale, management depth, integration expertise and access to capital to pursue both small and large acquisitions in the future.

Moving to B&G Foods, the company is likely to gain from the acquisition of McCann's Irish Oatmeal brand, which generated sales worth roughly $13 million in 2017. Notably, McCann's Irish Oatmeal is expected to grow under B&G Foods and complement its solid brands portfolio. Also, it marks another chapter in the company's story of achieving growth via acquisitions.

Well, B&G Foods actively pursues strategic acquisitions to boost growth. In 2017, the company acquired Back to Nature Foods Company, which contributed approximately $20 million to the company's top line in the first quarter. The company has acquired few other notable brands such as Green Giants, Victoria, Mama Mary and Specialty Brands from affiliates of American Capital, Rickland Orchards, Pirate Brands and TrueNorth.

Apart from the aforementioned companies, many other food players like J.M. Smucker SJM and Pinnacle Foods PF among many others are inclined toward achieving growth via strategic acquisitions and divestitures. That said, we expect TreeHouse Foods' sale of McCann's Irish Oatmeal brand to B&G Foods to be profitable and drive further growth for both companies.



Notably, TreeHouse Foods and B&G Foods have seen their shares rally almost 31% and 25%, respectively over the past three months, crushing the industry 's 5.3% growth. While TreeHouse Foods carries a Zacks Rank #3 (Hold), B&G Foods has a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: CAG , SJM , BGS , PF , THS



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