Kraft Heinz is selling control of its coffee business in North America.
The US group is offloading assets including the Maxwell House and Gevalia coffee brands to an affiliate of private-equity firm One Rock Capital Partners.
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Kraft Heinz said the deal, announced today (4 November), values the outgoing assets at $650m.
The Heinz ketchup maker, which had been rumoured in recent years to be looking to sell its domestic coffee business, will keep a 30% stake in the unit.
Kraft Heinz said the sale was part of its efforts to focus on “areas of the business where Kraft Heinz can accelerate growth and deliver the best value to consumers, customers, and shareholders”.
CEO Steve Cahillane added: “This transaction is a meaningful step in unlocking value from our portfolio and will further accelerate the momentum behind our transformation.”
Kraft Heinz expects the “net cash proceeds” from the deal to be around $500m, which the company will use to reduce debt.
It added it expects the transaction to be “growth and margin accretive”.
Since taking the helm at Kraft Heinz in January, Cahillane has sought to increase the company’s sales by categorising brands as “hold”, “win”, and “win big”. The group’s North America coffee business was labelled a “hold” business.
“Coffee sits within the ‘hold’ portfolio, where commodity volatility and private label exposure are higher and the company seeks to defend share. We view the sale positively,” Stifel analyst Matt Smith wrote in a note to clients today.
One Rock is acquiring assets including three coffee manufacturing facilities across Jacksonville in Florida and in the Canadian city of Vancouver. Around 250 full-time staff are set to move with the business.
Tony Lee, managing partner at One Rock, said: “We have long admired Kraft Heinz’s iconic coffee brands, such as Maxwell House and Gevalia, which have been household staples for more than 100 years.
“We intend to accelerate investment across the brand portfolio to drive growth and innovation, enhance the consumer experience, and strengthen relationships with retail partners.”
