The shares of ConAgra Foods are trading higher after announcing its agreement to sell its private label operations to TreeHouse Foods for approximately $2.7 billion in cash (excluding transaction-related expenses).

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The stock price of ConAgra climbed 1.53% to $41.18 per share at the time of this writing around 12:00 PM in New York.

Over the past 52-weeks, the shares of ConAgra traded between $33.45 and $45.49 per share. The Omaha-based packaged food company gained almost 20% in stock value over the past year.

ConAgra transaction details

Under the terms of the agreement, ConAgra will divest a majority of its continued private label operations including a network of 32 manufacturing facilities in Canada, Italy, and the United States.

ConAgra will retail certain private label operations with strong connection to its existing Consumer Foods Business such as the canned pasta, cooking spray, peanut butter, pudding/gels, and Gelit frozen pasta product offerings. It also includes the HK Anderson and Kangaroo brand equity, trademark and business portfolios.

The company will include the results of its remaining private label operations to Consumer Foods reporting segment in the first quarter of 2016.

ConAgra plans to use the net proceeds from the transaction to reduce its debt. The company expected to have a capital loss carryforward of around $4.2 billion with an approximate tax value of $1.6 billion after the transaction,

The company expected to close the deal in the first quarter of 2015. The transaction is subject to customary closing conditions and regulatory approvals.
Goldman Sachs and Centerview Partners served as financial advisors while Davis Polk & Wardwell LLP served as legal advisor to ConAgra on the transaction.

An important milestone for ConAgra

In a statement, ConAgra President and CEO Sean Connolly said the transaction is another important milestone for the company as they transform the business into a “focused, higher-margin, more contemporary and higher-performing company.”

“This transaction will enable ConAgra to sharpen our focus and resources on our Consumer Foods and Commercial Foods segments as we continue to move quickly to drive sustainable growth and deliver enhanced shareholder value,” said Connolly.

The deal creates the largest private label food & beverage manufacturer in the U.S.

Separately, TreeHouse Foods said it would fund the transaction through a combination of $1.8 billion in new debt issuance and approximately $1.0 billion in equity stock issuance.

According to TreeHouse, the deal would create the largest private label food and beverage manufacturer in the United States with annual revenue of almost $7 billion.

TreeHouse Chairman and CEO Sam K. Reed said, “Since our founding ten years ago, our strategy has been to drive shareholder value by consolidating supply of private label brands. We offer our customers value without compromise through economies of scale, quality products and superior customer service.”

The stock price of TreeHouse declined more than 5% to $81.18 per share at the time of this writing.