(Reuters) – TreeHouse Foods Inc (THS.N) agreed to buy health food products maker Sturm Foods from private equity firm HM Capital Partners for $660 million to strengthen its private label presence in the hot cereal and powdered soft drink mix categories, and raised its 2009 earnings outlook.
Shares of the Westchester, Illinois-based company rose nearly 19 percent to touch a life-time high of $39.79 and were among the top percentage gainers Monday morning on the New York Stock Exchange.
The deal will be funded by a combination of $400 million in new debt issuance, about $100 million through share sale and the balance from its existing credit facility.
TreeHouse, which makes and retails products like non-dairy coffee creamer, soups and salad dressings, expects the deal to add between 27 cents and 30 cents a share to earnings in 2010, and 38 cents to 40 cents a share on an annual basis.
Sturm Foods, which had sales of $340 million for the twelve months ended Sept. 30, makes health drink mixes and sticks, instant oatmeal and hot cereals.
Both financing and acquisition are expected to close in the first quarter of 2010.
TreeHouse expects to incur $19 million in one-time costs associated with inventory revaluations, transaction fees and issuance costs within the first year following closing.
The company has grown through acquisitions in the past, buying the soup and infant feeding business from a unit of Del Monte Foods Co (DLM.N) in 2006. It bought VDW Acquisition Ltd, a maker of Mexican sauces, and assets of E.D. Smith Income Fund in 2007.
RAISES 2009 EPS OUTLOOK
The company also raised its 2009 earnings-per-share forecast citing cost savings and strong sales growth.
It sees earnings of $2.10 a share to $2.12 a share, excluding items, compared with its prior view of $2.07 to $2.09 a share. Analysts had expected earnings of $2.10, according to Thomson Reuters I/B/E/S.
For 2010, excluding the impact of the acquisition, the company expects to earn $2.32 a share to $2.37 a share. (Reporting by Abhishek Takle in Bangalore; Editing by Aradhana Aravindan)