ConAgra Foods (NYSE:CAG) jumped in premarket trading after the biggest maker of private label foods in the United States agreed to sell its private-label unit to TreeHouse Foods (NYSE:THS) for $2.7bn.
Shares rose as much as 4.8% as of 9:09 a.m. in New York. The stock is up 12% this year.
TreeHouse said it would fund the cash transaction with about $1.0bn in stock and $1.8bn in new debt.
TreeHouse said it expects the purchase to slash adjusted earnings by $0.20-0.35 per share in the first year but add $0.55-$0.70 cents in the second year after closing.
ConAgra said it expects the deal to result in a capital loss carryforward of about $4.2bn with an approximate tax value of $1.6bn, which can be used to overshadow potential future capital gains over the next five years.
The deal will enable ConAgra to sharpen its focus and resources on its consumer foods and commercial foods segments, Chief Executive Officer Sean Connolly said.
Proceeds from the deal, which is expected to close in the first quarter of 2016, will be
used to pay down debt.