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- Freedom Foods (FNP) has sold its cereal and snack operations to iconic Australian brand Arnott’s for $20 million
- The consumer stock says it’s looking to simplify its product range amid several executive resignations, a $590 million write-down and a corporate watchdog investigation
- Overall, Freedom believes selling its cereal and snack operations will improve profitability and help prioritise growth opportunities
- As a result, FNP will change its name and update the market on this activity when the time is right
- The transaction is expected to finalise on March 1, 2021
- On the market, Freedom Foods shares remain under suspension and last traded for $3.01 each
Freedom Foods (FNP) is set to sell its cereal and snacks arm to Australian consumer giant Arnott’s Group for $20 million.
The company has decided to sell the sector to simplify its business structure and product range, as well as improve profitability and prioritise growth opportunities.
The cereal and snacks operations are a big chunk of the business, however, FN’s dairy and nutritional sector brings the majority of the money.
Freedom Foods’ manufacturing facilities — situated in Leeton and Darlington Point in New South Wales and in Dadenong in Victoria — will also be included in the sale.
Arnott’s is an iconic Australian consumer food company and the owner of Australia’s famous Tim Tam biscuits.
Following the sale of Freedom Foods’ cereals brands, the company will change its name, although more information on this decision is yet to come to light.
Freedom Foods CEO Michael Perich says Arnott’s is the perfect fit for its cereal and snacks business.
“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.
“This decision is consistent with the new executive team’s strategy of simplifying both our business structure and product range to ensure we are maximising growth opportunities in dairy and nutritionals and plant-based beverages,” he added.
Arnott’s is excited to have a new snack range that includes gluten-free foods and muesli bars.
“This purchase of manufacturing sites and leading consumer brands from Freedom Foods Group will accelerate our strategy of entering new product categories and unlock innovation to benefit customers and consumers,” CEO George Zognbi said.
“This will add three Australian manufacturing sites to our already well-invested domestic supply chain,” he added.
The transaction is expected to round up on March 1, 2021.
A challenging year
In June, Freedom Foods CEO, Rory Macleod, and CFO, Campbell Nicholas resigned from their positions following an investigation into the company’s financial position.
The news came after the food manufacturer saw a $35 million loss related to expired products, but this figure later increased to $60 million.
On top of that, it was later found the company had accrued $174.5 million in losses over the past financial year. Previous statements from Freedom indicated profits amounted to $11.6 million, meaning the downgrade was a significant about-face.
Overall, the business tabled $590 million in write-downs, the majority of which is linked to changes in asset values. It’s been enough to catch the corporate watchdog’s eye, with the Australian Securities and Investments Commission (ASIC) launching an investigation.
That’s not all: last week, shareholders launched a class-action lawsuit against the company and its auditor, Deloitte. They claim the companies failed to disclose the true assets of Freedom Foods.
In the midst of all this, Freedom Foods commenced legal proceedings against Almond Breeze manufacturer Blue Diamond Growers over a disputed licensing agreement.
FNP shares dropped in June and the company suspended trading the same month, meaning the write-downs, ASIC investigation, and class action are yet to impact the company’s share price.
Shareholders say they were not given enough time to respond to the falling share price.
On the market, Freedom Foods shares remain under suspension and last traded for $3.01 each.
