Snacks & Candy

TreeHouse Foods to Acquire Flagstone Foods

Positions combined company as a private-label leader in healthy snacks sector

OAK BROOK, Ill. -- TreeHouse Foods Inc. has announced that it will acquire Flagstone Foods, a leading provider of private-label healthy snacks. TreeHouse has agreed to pay Gryphon Investors and other shareholders $860 million in cash for the business, subject to an adjustment for working capital.

TreeHouse Flagstone Foods (CSP Daily News / Convenience Stores / Snacks)

The company said it expects the transaction to close during third-quarter 2014, subject to customary closing conditions, and it expects to finance the deal through a combination of borrowings under TreeHouse's existing credit facility and a $325 million equity issuance.

Flagstone Foods is one of the largest manufacturers and distributors of private-label healthy snacks in North America, and holds a leading private-label position in the trail mix and dried fruit categories. The St. Paul, Minn.-based company has approximately 1,365 employees and operates facilities in Minneapolis and Roberson, N.C. It reported sales of $697 million for the fiscal year ended Dec. 28, 2013.

"Flagstone Foods is ideally situated at the intersection of health and wellness, snacking and the perimeter of the store, and represents an attractive new platform for TreeHouse to enter the on-trend, rapidly growing $7.1 billon healthy snacks category," said Sam K. Reed, chairman, president and CEO of TreeHouse Foods.

"Flagstone Foods has also demonstrated a capability to broaden its product offering with existing customers, to expand into new categories through innovation and to achieve new customer wins," he added. "Over the last three years, the company has seen top line growth of 24% per annum as well as meaningful margin expansion, and has a clear strategy in place to continue its growth trajectory. In addition, Flagstone Foods has made great strides in partnering with retailers to merchandise healthy snacks along the perimeter of the store, where consumer traffic continues to grow. This initiative creates incremental and highly profitable sales for its retail partners, and has resulted in a three-year CAGR of perimeter sales for Flagstone of nearly 50% in the last three years, with little cannibalization of other volume."

"I'm very proud of what we have built to date at Flagstone Foods, and I believe that we are just getting started," said Paul Lapadat, CEO of Flagstone Foods. "By joining TreeHouse Foods, I am confident that we will continue our strong track record of growth. Our management team is among the best, comprised of food industry veterans, and we remain highly focused on delivering innovative and on-trend healthy snacks by both adding new customers and growing and expanding our existing retail partnerships."

Oakbrook, Ill.-based TreeHouse is a food manufacturer servicing primarily the retail grocery and foodservice distribution channels. Products include non-dairy powdered creamers and sweeteners; condensed, ready to serve and powdered soups; refrigerated and shelf-stable salad dressings and sauces; powdered drink mixes; single-serve hot beverages; specialty teas; hot and cold cereals; macaroni and cheese, skillet dinners, and other value-added side dishes and salads; salsa and Mexican sauces; jams and pie fillings; pickles and related products; aseptic sauces; and liquid non-dairy creamer.

Flagstone Foods purchases, prepares, packages, distributes and sells more than 1,500 branded and private-label varieties of snack nuts, trail mixes, dried fruit, snack mixes and other wholesome snacks to major retailers in North America. The Flagstone Foods family of companies currently consists of Ann's House of Nuts, a major manufacturer and marketer of trail mixes, and American Importing Co. (Amport Foods), a large private-label manufacturer and marketer of dried fruits.

San Francisco-based Gryphon focuses on leveraged acquisitions of, and growth investments in, middle-market companies in partnership with experienced management.

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