TreeHouse Foods Inc. (THS) on Monday raised its 2009 earnings guidance and announced the acquisition of cereal maker Sturm Foods for $660 million. The company stated that it now expects full-year adjusted earnings to range between $2.10 and $2.12 per share, compared to the earlier prediction of $2.07 to $2.09 per share. The revised guidance is in line with the Zacks Consensus Estimate of $2.10 per share derived from 9 covering analysts. 

The company also offered guidance for 2010 and anticipates earnings of $2.32 to $2.37 per share, excluding the impact of the acquisition. The Zacks Consensus Estimate for the year is currently pegged at $2.32 per share, which has moved up by 6 cents over the past 2 months. The acquisition of Sturm Foods from HM Capital Partners LLC and other shareholders is expected to add another 27 cents to 30 cents to TreeHouse’s 2010 earnings. Sturm Foods will bolster TreeHouse’s presence in private label hot cereal and powdered drinks as well as improve R&D, packaging, mixing and flavoring capabilities. TreeHouse shares surged more than 12% after the news to close at $37.70 yesterday on the New York Stock Exchange. 

TreeHouse said that it will finance the deal through a combination of $400 million in new debt issuance, $100 million in new equity issuance and the rest from existing revolving credit facilities. The company will also incur approximately $19 million in one-time costs within the first year following the expected closing of the acquisition by March 2010. TreeHouse was advised by BofA Merrill Lynch on the deal, while HM Capital and Sturm Foods were advised by Deutsche Bank. 

TreeHouse is a food manufacturer servicing primarily the retail grocery and foodservice channels. The company’s product portfolio includes non-dairy powdered coffee creamer, canned soup, salad dressings, jams and pie fillings under the E.D. Smith brand name, pickles and related products; infant feeding products, and other food products including aseptic sauces and liquid non-dairy creamer.
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