Shares of Compass Diversified (NYSE:CODI) climbed 17% on Monday after the company announced a definitive agreement to sell the food service segment of its majority-owned subsidiary Sterno for $292.5 million.
Archer Foodservice Partners will acquire the business at an enterprise value of $292.5 million, with the purchase price subject to customary working capital and other adjustments. Compass Diversified disclosed that the unit generated approximately $30.3 million of subsidiary adjusted EBITDA in 2025, a figure that includes certain shared overhead expenses that will remain post-transaction.
The company said it intends to deploy the net proceeds from the sale to repay outstanding debt. Following closing and the anticipated repayment of senior secured indebtedness, Compass Diversified expects its senior secured net leverage ratio to fall below 1.0x. The company also stated it expects to avoid fees tied to excess leverage under its senior secured debt beyond June 30, 2026.
Compass Diversified will retain Sterno's home fragrance business after the sale. That business will continue to operate under the Rimports name. Rimports, based in Provo, Utah, is described by the company as a manufacturer and distributor of branded and private-label home fragrance products.
In a statement accompanying the announcement, Elias Sabo, Chief Executive Officer of Compass Diversified, said: "This transaction is a critical step in reducing leverage at CODI and reflects our commitment to taking decisive action - strategically selling businesses, rapidly deleveraging the balance sheet and addressing the gap between the market price and our intrinsic value."
The transaction remains subject to customary closing conditions, including applicable regulatory approvals. Compass Diversified said it expects the sale to close in May 2026.
Financial and legal advisers on the deal are Raymond James, serving as financial advisor to Compass Diversified, and Brownstein Hyatt Farber Schreck, LLP, serving as legal counsel.
This announcement affects Compass Diversified's capital structure and operating portfolio. Management has signaled a clear intention to use asset sales to trim leverage and reduce potential covenant or fee exposures tied to excess leverage. The retained Rimports operations will maintain the company's exposure to home fragrance manufacturing and distribution while removing the food service unit from its consolidated food-service exposure.