TreeHouse Foods, Inc. THS has entered into a definitive agreement to acquire select subsidiaries of Harris Freeman & Co., Inc. ("Harris Tea"), a top private brand tea manufacturer in the United States. Valued at approximately $205 million, the acquisition is expected to conclude in the first quarter of 2025.

The envisioned buyout aims to solidify TreeHouse Foods’ position in the growing tea category while adding unique sourcing and blending capabilities. The move aligns with the company's strategic focus on higher-growth, higher-margin categories. By combining Harris Tea's expertise with its existing operations, the company is poised to capitalize on consumer demand for private-label tea products.

TreeHouse Foods’ Growth-Oriented Investment

Harris Tea brings significant value to TreeHouse Foods’ portfolio. The acquisition includes Harris Tea’s manufacturing facilities in Moorestown, NJ, and Marietta, GA, as well as nearly 300 employees. This vertical integration will bolster THS’ existing tea operations, enhance profitability and strengthen customer offerings.

The purchase price represents 8.5x trailing twelve-month adjusted EBITDA and drops to 6.5x after accounting for synergies and net present value of projected tax benefits. The company plans to fund the acquisition primarily through cash on hand, keeping its leverage ratio within its target range of 3.0x to 3.5x.

As the transaction closes, TreeHouse Foods remains committed to its fiscal 2024 guidance, highlighting the expectation of continued improvement in volume growth and profit margins in fourth-quarter fiscal 2024.

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What Else Should You Know About THS?

TreeHouse Foods' shares have declined by 15% over the past three months, underperforming the industry’s 5.9% drop. This slowdown is attributed to weak consumer trends, slower category growth and operational disruptions, including voluntary product recall and hurricane-related distribution issues. Despite positive private brand unit sales in the fiscal third quarter, there has been a noticeable slowdown, raising concerns about sustaining growth amid persistent market challenges for the Zacks Rank #5 (Strong Sell) company.

All that being said, the latest acquisition move highlights TreeHouse Foods' commitment to enhancing its leadership in growing and profitable market segments, positioning the company for long-term success.

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