Shares of coffee, tea, and related products provider Farmer Bros. Co. (NASDAQ:FARM) are surging upward today after it agreed to sell its direct ship business to TreeHouse Foods (NYSE:THS) for about $100 million.
The deal also involves FARM’s Northlake, Texas facility and the company plans to use the funds raised to pare down its debt. Importantly, the move will help make FARM’s balance sheet more flexible while also allowing it to focus on driving margins and strategic growth in its direct store delivery (DSD) and key account sales channels.
The transaction is anticipated to close within the next 60 days and upon closing the company expects to transition its entire DSD production to its facility in Portland, Oregon. After this sale, FARM anticipates reaching $350 million in annual revenue with an improved product margin profile.
Overall, the Street has a $6 consensus price target on FARM implying a substantial 90.5% potential upside in the stock.
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