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ConAgra Foods just made this big move to revamp its business

ConAgra Foods Chef Boyardee brand mini ravioli is displayed for a photograph in Tiskilwa, Illinois, U.S., on Monday, March 23, 2015. ConAgra Foods, Inc., is scheduled to report its fiscal 2015 third-quarter results on Thursday, March 26, 2015. Photographer:  Daniel Acker/BloombergConAgra Foods Chef Boyardee brand mini ravioli is displayed for a photograph in Tiskilwa, Illinois, U.S., on Monday, March 23, 2015. ConAgra Foods, Inc., is scheduled to report its fiscal 2015 third-quarter results on Thursday, March 26, 2015. Photographer:  Daniel Acker/Bloomberg

ConAgra Foods said Monday it will sell its private-label brands business to TreeHouse Foods for $2.7 billion in cash.

Under the terms of the deal, ConAgra (CAG) will divest the vast majority of the company’s private label operations as well as 32 manufacturing facilities in the U.S., Canada and Italy. The proceeds from the deal will be used for debt reduction. Following the deal, TreeHouse (THS) will have pro forma sales of nearly $7 billion. The move is the latest in a string of deals by TreeHouse to bulk up.

The sale comes just several months after ConAgra – known as the seller of Slim Jim jerky and Hunt’s tomato sauce – faced pressure to ditch the private-label brands it owned after buying Ralcorp for nearly $5 billion in early 2013. In June, activist investor Jana Partners bought a significant stake in ConAgra and less than two weeks after that news,it was reported that ConAgra would exit the private-label business. The Ralcorp deal was meant to give ConAgra greater scale to buy ingredients, but as The Wall Street Journal reported, the businesses were tough to integrate and margins for private label foods have been muted.

TreeHouse, spun off from Dean Foods (DF) about a decade ago, has partly grown its business through a series of at least 10 acquisitions. It now manufacturers products across many food categories, including beverages, salad dressings, Mexican and other sauces and cereals. Sales have consistently climbed, reaching nearly $2.95 billion in 2014, though profits have been far choppier over the past five years.

On Monday, TreeHouse also gave investors a third-quarter preview, pre-announcing sales of $799 million for the period with adjusted earnings of 85 cents to 86 cents per share. Analysts had anticipated $838 million in sales on an 82-cent profit.