OAK BROOK, Ill. - TreeHouse Foods, Inc. (NYSE: NYSE:THS), currently valued at $1.8 billion in market capitalization, has finalized the purchase of Harris Tea for approximately $205 million, the company announced today. According to InvestingPro analysis, TreeHouse Foods appears undervalued at current trading levels. The acquisition, funded mainly with cash on hand, is expected to enhance TreeHouse Foods’ position in the private label tea market and contribute positively to its revenue and profitability in 2025.
Steve Oakland, Chairman, CEO, and President of TreeHouse Foods, stated that the addition of Harris Tea aligns with their strategy and leverages their balance sheet strength. With a current ratio of 1.4, InvestingPro data shows the company’s liquid assets exceed short-term obligations, supporting this strategic move. He noted that Harris Tea’s expertise in tea sourcing, blending, and packing, along with its established industry connections, will bolster TreeHouse Foods’ leadership in the private label sector.
The transaction is valued at roughly 8.5 times the trailing twelve months’ adjusted EBITDA of Harris Tea, or 6.5 times after accounting for synergies and the net present value of anticipated tax benefits.
TreeHouse Foods is a prominent manufacturer of private brand snack and beverage products in North America, committed to driving profitable growth for both the company and its customers. The firm reiterated its full-year guidance for 2024, anticipating sequential volume growth and improved profit margins in the fourth quarter.
This acquisition comes amid a broader industry trend of consolidation and expansion within the food and beverage sector, as companies seek to enhance their product offerings and market reach. TreeHouse Foods’ strategic move to acquire Harris Tea is a reflection of this trend and underscores the company’s growth-oriented approach.
The information for this report is based on a press release statement from TreeHouse Foods.
In other recent news, TreeHouse Foods has made several significant moves. The company announced a $400 million share buyback program, underscoring its financial stability and future cash flow potential. On the acquisition front, TreeHouse Foods has entered into an agreement to purchase the private brand tea operations of Harris Freeman & Co, Inc. for approximately $205 million, a step that is expected to bolster its presence in the tea category.
These recent developments include a strategic shift towards improving margins and cash flow, as well as the completion of the divestiture of its Snack Bars business. Moreover, Barclays (LON:BARC) has adjusted its outlook on TreeHouse Foods, reducing its price target from $39 to $32 while maintaining an Equalweight rating on the stock.
TreeHouse Foods’ Q3 2024 financial results showed mixed performance with adjusted net sales of $854 million, slightly below its guidance due to weakening consumer trends and disruptions from Hurricane Helene. Despite a weaker outlook for 2025 due to a decline in volume, the company remains focused on enhancing profitability and cash flow.
In terms of analyst expectations, the company’s next earnings report in February 2025 will provide further insights into its performance and strategic direction. As TreeHouse Foods navigates a challenging market environment, these recent developments will continue to shape its strategic initiatives and financial health.
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