WESTCHESTER, ILL. — TreeHouse Foods has signed an agreement to acquire Sturm Foods from HM Capital Partners L.L.C. and other shareholders for approximately $660 million. Founded in 1905, Sturm Foods primarily makes hot cereals, powdered soft drink mixes and other dry mix products for the private label market. HM Capitals has owned Sturm Foods since May 2005.

"Sturm Foods is a significant addition to TreeHouse, both strategically and financially," said Sam K. Reed, chairman and chief executive officer of TreeHouse. "Sturm will give us the leadership position within the private label hot cereal and powdered soft drink mix categories. Both categories are large and growing, offer health and convenience benefits, and have significant private label shares of 26% and 20%, respectively."

According to TreeHouse, the acquisition of Sturm Foods will add $340 million in annual sales, boosting TreeHouse’s pro forma sales to approximately $1.9 billion and adjusted EBITDA to more than $275 million. The transaction is expected to be more than 16% accretive on an annualized basis, adding 38c to 40c in earnings per share.

TreeHouse said it plans to fund the acquisition through a combination of $400 million in new debt issuance, approximately $100 million in equity stock issuance, and the balance funded from borrowings under the company’s existing revolving credit facility. The acquisition is expected to close by March 31, 2010, and TreeHouse said it anticipates $19 million in one-time costs associated with the transaction.

"With the addition of Sturm, TreeHouse will have the top market share in six complementary private label categories, and we will further expand our center-of-store offerings, where grocery sales and profits are driven," Mr. Reed said. "We also see meaningful opportunities to further develop Sturm’s category presence in non-traditional retail channels, food service and Canada, while leveraging their innovative R.&D. capabilities and generating attractive procurement savings."

Sturm Foods has 750 employees and operates three facilities in Manawa, Wis. The company sells to both retail and food service customers, and the bulk of its product portfolio is evenly mixed between hot cereals and powdered soft drink mixes. In addition to private label products, the company offers several branded products, including McCann’s Irish Oatmeal, Vita Splash, Fulfil Fitness, Power Edge, Morning Spark, Replenish and Moo Magic.

Separate from the transaction, TreeHouse raised its 2009 full-year earnings-per-share guidance to $2.10 to $2.12, up from $2.07 to $2.09.

"We continue to generate excellent top-line growth and benefit from our cost-savings programs in the fourth quarter," Mr. Reed said. "Our results demonstrate that grocery customers and consumers are committed to the proposition of high-quality private label products at value prices."