American cereal company Post Holdings will explore the option of selling its private-label business or floating it on the stock exchange as a separate entity, following its deal to acquire refrigerated food firm Bob Evans Farms for $1.5 billion.
Post has revealed four options open to its private brands business: a sale, an initial public offering (IPO), a placement of private equity or a strategic combination.
The unit produces nut butter, dried fruit and nut, pasta, and granola products for a number of leading retailers, distributors and manufacturers.
Post will initially combine its private brands business under the leadership of Jim Dwyer, currently president and CEO of Post’s Michael Foods Group. It expects to complete the acquisition of Bob Evans – the maker of a number of potato- and pasta-based side dishes, as well as several sausage products – tomorrow.
Post president and CEO Rob Vitale said: “We believe Jim Dwyer’s leadership will drive value creation in our strategic private brands businesses. We further believe the best structure to support Jim and his team is likely outside of Post’s full ownership and we will aggressively explore creative alternatives involving direct capital and/or strategic partnerships.”
Dwyer added: “Private brands will continue to be a strong growth driver across all trade channels and customers. It’s exciting to create a business singularly focused on partnering with customers to profitably grow our respective businesses.”
Post expects to start reporting the private brands businesses – including Golden Boy, Dakota Growers and Attune Foods – as one segment beginning in the second quarter of its 2018 fiscal year. These businesses, for the year to the end of September, reported net sales of $791.2 million and net earnings of $43.4 million.
It has also today reaffirmed its intention to create a refrigerated retail business unit, including Michael Foods’ retail egg, potato and cheese business, led by Bob Evans CEO Mike Townsley.
It will also form a foodservice business, led by current Michael Foods CFO and second-in-command to Jim Dwyer, Mark Westphal.
Post’s acquisition of Bob Evans Farms, which it expects to go through this week, was the climax of a strong year in which it also recorded a 4% increase in revenue – up from $5.03 billion to $5.23 billion.
In April, the company agreed to purchase the British cereal manufacturer Weetabix, which makes the second most popular breakfast cereal in the UK, from owners Bright Food and Baring Private Equity Asia. That deal was valued at $1.8 billion and closed in the third-quarter of Post’s financial year, at which time it raised its earning forecast for the full year.
Following the acquisition, Post CEO Rob Vitale said he expected to see ‘growth opportunities’ from the merger.
“We have long admired Weetabix as a leader in cereal and believe it will be a fantastic strategic fit within Post,” Vitale said.
He added that the acquisition “combines together two category leaders [and] continues our strategy of strengthening our portfolio in stable categories and diversifying into new markets”.
© FoodBev Media Ltd 2017