ConAgra Foods is giving up on its St. Louis-based private brands unit after about three years. The Nebraska-based company is selling most of what it acquired in the 2013 Ralcorp deal to TreeHouse Foods in a $2.7 billion transaction.
ConAgra acquired Ralcorp for roughly $5 billion, but had not been able to help the company rebound from struggles that included increased manufacturing costs.
“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.
“We think that we’ve got the opportunity to come in and help get the direction set in private label to see the improvements that we think they are capable of.”
The deal is expected to close early next year. After that, TreeHouse will likely decide which offices will remain open.
ConAgra tells St. Louis Public Radio it has no plans to cut any jobs before the sale goes through, including the roughly 235 positions at the St. Louis private brands’ office.
The company says Monday’s deal includes more than 30 manufacturing plants in the U.S., Canada and Italy. It is planning to keep some of the business that has strong connections to other operations, including product lines involving peanut butter, pasta and cooking spray.
“The sale of our private label business marks another important milestone as we remake ConAgra Foods into a focused, higher-margin, more contemporary and higher-performing company,” ConAgra Chief Executive Officer Sean Connolly stated in a news release issued early Monday.
He added the announcement follows a “robust sale process” that involved more than 35 potential buyers.
One of those suitors was believed to be St. Louis-based Post Holdings. But its interest apparently declined in the past couple of weeks, following reports that ConAgra was closing in on a deal with TreeHouse.
Post Holdings was spun off from Ralcorp in 2012. Ralcorp is also a spinoff. It was part of Ralston Purina until 1994.
TreeHouse’s plan for what what remains of Ralcorp includes re-working parts of the company that have already been absorbed by ConAgra.
“What was in St. Louis – originally as Ralcorp – nearly all the back office functions were moved to Omaha and consolidated,” says Riordan.
“I-T was consolidated for the most part and now we have to undo that. And that’s not something that happens overnight.”
There is expected to be a two-year transition period for both companies. The shared services during that period could help TreeHouse better integrate the private label operations.
Former Ralcorp Chief Executive Officer Kevin Hunt has been brought in by TreeHouse as a senior adviser. He will play a key role in helping the companies make a smooth transition.
The combination of TreeHouse and the vast majority of what used to be Ralcorp is expected to create the largest private label food company in the U.S. with annual revenue of nearly $7 billion.
ConAgra plans to use proceeds from the deal mainly to pay down debt.
