Net assets of approximately of $20m are included in the sale – including the company’s three manufacturing facilities in New South Wales and Victoria – however, Freedom will only packet net cash proceeds of $11m after deducting costs associated with the transaction and related equipment leases.
The company has also agreed to a corporate name change (the Freedom Foods name will stay with the cereals and snacks unit), but also to distance itself from its recent chequered history.
For the 12 months ended 30 June 2020, Freedom revealed a $174.5m loss after tax and over $590m in asset write-downs. Prior to restating its accounts, the company had recorded positive EBITDA of $55.2m in FY 2019.
On posting the results, Freedom Foods’ interim CEO Michael Perich expressed a ‘deep disappointment’.
“The results reflect the significant costs of past accounting and operational matters – matters we have identified with the assistance of independent experts and are taking steps to remedy,” he said.
“Operationally, we are reviewing the economics of every product line, every site, every sales channel and every market segment to ensure we are focused on those brands with the greatest potential to deliver profitable sales. We will be removing products that are not delivering value and investing in the ones that are.
“Freedom Foods needs to become a simpler business – and that includes identifying parts of our business that may perform better under different ownership.”
The company lost its chairman, CEO and CFO in quick succession, following the discouraging results. The Perich family are Australia's largest dairy farming family, which own 54% of Freedom Foods.
Freedom is also purportedly looking to sell its canned seafood businesses as part of its revamp plans to maintain focus on its dairy and nutritionals and plant-based beverages businesses.
The majority of the cereals and snacks unit’s 150-strong workforce will transfer to the new owners but some redundancies will be unavoidable.
Perich said the Kohlberg Kravis Roberts (KKR)-backed Arnott’s Group will be a highly complementary owner.
“We believe the cereal and snacks business will thrive under an owner such as the Arnott’s Group, which is committed to investing in the business and employees to ensure a sustainable and successful future,” he said.
Arnott’s CEO George Zoghbi said the acquisition will accelerate its strategy of entering new product categories and unlocking innovation. The company has procured in a $3.2bn deal by US private equity giant KKR for Campbell Soup’s international operations in 2019.
The Freedom Foods transaction is expected to be completed on 1 March 2021.