Kehe Acquires Tree of Life 2010

ROMEOVILLE, Ill. — Kehe Food Distributors here has agreed to acquire natural-food distributor Tree of Life from Dutch conglomerate Royal Wessanen, the companies said late last month.

The sale, for which Kehe will pay $190 million in cash, is expected to close early this year. It includes Tree of Life U.S., based in St. Augustine, Fla., and Tree of Life Canada, which operates out of Calgary, Alberta.

Early last year, Wessanen said it would put its North American businesses on the block in order to realign its portfolio and return to a Euro-centric business model. Wessanen had purchased Tree of Life in December 1985 when it launched a push into natural/organics distribution.

Tree of Life currently operates 10 distribution centers in the United States and three in Canada. Kehe is a privately owned distributor of specialty, gourmet and ethnic products to retail grocery stores of all sizes in all 50 states, as well as Mexico and the Caribbean. It had estimated sales of $750 million in 2008, according to Hoovers.com.

Edward Aaron, a Denver-based analyst with RBC Capital, said it is too soon to determine what the impact might be on Tree of Life's biggest rival, United Natural Foods Inc., Dayville, Conn., which itself struggled to integrate an acquisition last year.

“If Kehe does indeed struggle with the integration, it could open a window of opportunity for UNFI to take market share,” he said in a report.

Kehe could, however, execute well and become a “formidable competitor” to UNFI, or could also get very aggressive on price in the near term, he said.