Farmer Bros. Company (NASDAQ: FARM), a prominent roaster, wholesaler, equipment servicer, and distributor of coffee, tea, and other allied products, experienced a significant surge in its stock price during pre-market trading.
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The trading price in pre-market on Wednesday stood at $2.74, reflecting a remarkable increase of 41.96%. This surge in stock price was prompted by the recent announcement made by Farmer Bros. regarding the sale of its direct ship business and Northlake, Texas facility to TreeHouse Foods, Inc., for approximately $100 million.
Agreement to Strengthen Balance Sheet and Drive Growth
Farmer Bros. Company has entered into a definitive agreement to sell its direct ship business, including its Northlake, Texas facility, in a strategic move aimed at enhancing its balance sheet and focusing on key growth areas.
The proceeds from the sale, subject to customary purchase price adjustments, will be utilized to pay down outstanding debt associated with its asset-based lending (ABL) and retire its term loan.
This transaction is expected to provide Farmer Bros. with increased balance sheet flexibility, enabling the company to concentrate on execution, improve margins, and drive strategic growth in the direct store delivery (DSD) and key account sales channels.
Impact on Operations and Financial Outlook
Upon completion of the sale, Farmer Bros. will transfer its DSD production operations to its Portland, Oregon roasting and production facility, while maintaining relationships with third-party roasters for additional capacity.
The company’s corporate headquarters will remain in Northlake, Texas, and it will continue to lease office space at its current location. The sale of the Northlake, Texas facilities is anticipated to result in improved product margins, with Farmer Bros. expecting annual revenue of approximately $350 million going forward.
Closing and Transition
The sale of the direct ship business and Northlake facility is subject to customary closing conditions and is expected to be finalized within the next 60 days. As part of the transition, approximately 180 Farmer Bros. team members will be transitioned to TreeHouse Foods, who will assume operations at the Northlake, Texas facility.
Conclusion
The strategic decision by Farmer Bros. Company to sell its direct ship business and Northlake, Texas facility to TreeHouse Foods, Inc. for approximately $100 million represents a significant milestone for the company. By utilizing the proceeds to reduce debt and enhance its financial position, Farmer Bros. aims to strengthen its operations and focus on key growth areas in the DSD and key account sales channels.
