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TreeHouse Buying Sturm Foods For $660M

Food maker said it will buy hot cereal and powdered soft drink mix maker Sturm Foods for $660 million as it looks to strengthen its presence in private label dry groceries.

WESTCHESTER, Ill. (AP) -- Food maker TreeHouse Foods Inc. said Monday that it will buy hot cereal and powdered soft drink mix maker Sturm Foods for $660 million as it looks to strengthen its presence in private label dry groceries.

The deal with HM Capital Partners LLC and other stockholders will boost TreeHouse's pro forma sales to about $1.9 billion after the transaction is complete, TreeHouse said. The transaction also is expected to add about 38 cents to 40 cents per share to earnings on an annual basis.

TreeHouse Chairman and CEO Sam Reed said in a statement that the hot cereal and powdered soft drink mix categories continue to grow.

TreeHouse plans to pay for the transaction with $400 million in new debt, about $100 million in equity stock and borrowings under an existing revolving credit agreement.

The company anticipates one-time costs of approximately $19 million during the first year after the acquisition's closing related to transaction fees, issuance costs and the revaluation of inventory. The acquisition is targeted to close by March 31.

Sturm, which sells to retail and food service customers, runs three facilities in Manawa, Wis., and has 750 workers. It recorded sales of $340 million for the 12 months ended Sept. 30.

TreeHouse also increased its 2009 adjusted earnings forecast Monday and provided guidance for next year.

Shares of TreeHouse Foods advanced $1.94, or 5.8 percent, to $35.50 ahead of Monday's market open. The stock has ranged from $24.05 to $38.22 over the past year.

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