Bringing Bad Brands Back to Life

Just because private equity firms don't have access to easy money anymore doesn't mean the M&A market is closed. In fact, there are companies in an even better position to buy now that the gravy train is slowing for Stephen Schwarzman and company.

Treehouse and B&G Foods have made a business buying ailing brands and turning them around for a profit. But until now they've had some heavy competition from the private-equity sector. The recent credit crunch has left an opening for Treehouse and B&G, and Cramer expects them to capitalize on it.

Treehouse made its shareholders good money when it turned around Keebler. It currently owns private-label company E.D. Smith, San Antonio sauces, Santa Fe chili and jalapeno peppers, Oxford pickles and peppers, among others. Cramer said Treehouse could put on at least $100 million in debt, and it has plenty of free cash flow to fund even more purchases. Kraft's salad dressing business is one potential target.

B&G also has a history of successfully reinvigorating food brands. Ortega taco sauce is number one nationally in its category. Cream of Wheat and Polaner, formerly owned by Pillsbury, are number two in their classes. The stock yields a hefty 6.4%. The deal with Kraft for Cream of Wheat could lead to future deals as well, Cramer said.

In addition to the leveled M&A playing field, the pressure Kraft and Procter & Gamble are getting to sell off their unprofitable divisions is another factor working in the favor of Treehouse and B&G. Actually, Kraft is getting hit on all sides to sell, from Wall Street, Madison Avenue and activist shareholders Nelson Peltz and Carl Icahn. Kraft and P&G need to shed some weight in order to grow. With less competition in the marketplace, Treehouse and B&G could pick up some new assets at discount prices.

Of course, one of the best things Treehouse and B&G have going for them is that neither is exposed to the problems the homebuilders, bankers, brokers and mortgage lenders face. And they're recession-proof, Cramer said.

"I can't remember anyone who stopped eating Cream of Wheat because of a hard-to-pay home-equity loan," he said.

"No matter how bad the tape gets, there are always winners," Cramer said. "One of them is Treehouse. The other is B&G."

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