Conagra Brands announced it has agreed to sell the iconic Wesson Oil brand to JM Smucker Company in an all-cash deal valued at $285 million.

Under the terms of the deal, Conagra will continue to manufacture Wesson branded products and provide select transition services for up to one year following the close of the transaction. However, upon completion of the transition period, JM Smucker expects to fold Wesson production into its existing oils manufacturing site located in Cincinnati, Ohio.

“The addition of Wesson® creates a strong complement to our Crisco® brand,” said Mark Smucker, CEO of JM Smucker Company. “By allowing us to more efficiently use existing supply chain and go-to-market resources, this acquisition will lead to significant cost savings that can further fuel growth and innovation opportunities across the Company.”

JM Smucker anticipates that the acquisition will add $230 million in annual sales to its sheet, and expects the transaction to generate earnings before interest, taxes, depreciation, and amortization (EBITDA) of about $30 million. Additionally, the company expects the addition to contribute approximately $0.10 cents to the company’s adjusted earnings per share within the first full year after closing.

If estimates are correct, this acquisition could prove to be shot in the arm for Smucker’s sales, according to Food Dive, which states that Smucker’s sales fell 5 percent in the third quarter of FY 2017 year on year – a development that the company says is due to consumer tastes shifting away from its Folgers coffee brand.

And although Wesson is not a cutting-edge, new brand geared toward the latest consumer demands, the name carries with it the gravitas of a mainstay brand that has been “trusted by consumers for over 100 years” while also providing JM Smucker with a tax benefit in the region of $45 million and annual synergies valued at $20 million.

For Conagra, the sale is indicative of its continuing transformation since Sean Connolly assumed the role of CEO in 2015.

Since that time, Conagra has undertaken a strategic plan to reinvigorate its portfolio to better align with consumer demands and reflect a more modern lineup. Toward this end, Conagra divested its Ralcorp private label business to TreeHouse Foods in the fourth quarter of 2015  for $2.7 billion, sold ingredient sourcing and distribution company JM Swank to private equity firm Platinum Equity in June 2016, and sold flavors and seasoning business Spicetec to Givaudan in May 2016. Meanwhile, the company acquired salsa and sauce manufacturer Frontera Foods in September of last year.

“We continue to reshape our portfolio and focus our resources on priorities that support Conagra’s business strategy and drive value creation for shareholders,” said Sean Connolly, president and chief executive officer of Conagra Brands in a company statement. “We believe The J.M. Smucker Company will be a terrific steward of the Wesson brand.”

The strategy appears to be working for Conagra, as Reuters reports that the company’s third quarter profits announced in March exceeded expectations as the company continues to eliminate lower-margin offerings from its product lines.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration, please contact Ms. Kiernan at lkiernan@globalaginvesting.com.