By Annie Gasparro And Chelsey Dulaney
Post Holdings Inc. announced a $1.15 billion acquisition to
expand in a business many companies have been trying to diversify
away from: breakfast cereal.
The maker of Fruity Pebbles and Honeycomb on Monday said it
would buy MOM Brands Co., a privately held company best known for
selling lower-priced cereals including Berry Colossal Crunch and
Honey Buzzers that are often similar to bigger, better-known
brands.
The move comes as Post and other breakfast-cereal makers
including larger rivals Kellogg Co. and General Mills Inc. have
been grappling with changing eating habits of Americans that have
driven down overall sales for breakfast cereal. Americans in recent
years have been shifting breakfast consumption toward
lower-carbohydrate breakfasts that they can consume on the go.
In that environment, cereal companies have been gobbling up
companies in other food categories--including Post, which since its
spinoff from Ralcorp Holdings Inc. in 2012, has bought brands that
make peanut butter, pasta and other items. Last year, Post acquired
PowerBar energy bars and Michael Foods Inc., which makes All Whites
egg whites and Crystal Farms dairy products in an effort to tap
into the high-protein trend.
But Post said sales of cereal sold in bags--as MOM's brands
often are--instead of the usual boxes, have risen 5.6% annually in
the past four years, based on Nielsen data. MOM also sells Mom's
Best, a line of boxed cereal that markets itself as affordable,
environmentally friendly, and free of artificial flavors,
preservatives, and other ingredients disliked by increasingly
health-conscious consumers.
"For Post, this is the right move, at the right price, in the
right category," Post Chief Executive Rob Vitale said. "After a
century of spirited rivalry between MOM Brands and Post, we now
look forward to combining our strengths."
MOM started nearly 100 years ago making Malt-O-Meal and has
remained owned by the founder's family. The company, which changed
its named to MOM in 2012, now sells 11 brands of hot and cold
cereals, some of which resemble popular boxed cereals, like its
Frosted Mini Spooners and Kellogg's Frosted Mini Wheats.
The deal came as Post on Monday also gave preliminary financial
data for its latest quarter, which ended in December, that beat
expectations--thanks in part to strong sales of cereal, as well as
in its egg, cheese and potato segments.
Post's shares soared 17.8% on the announcements to $48.83 in 4
p.m. trading on the New York Stock Exchange.
The St. Louis-based company, which has a market value of about
$2 billion at its current share price, said it would fund the
purchase by selling $240 million in stock and borrowing $700
million, in addition to using cash on hand. Under the terms of the
deal, Post will pay MOM $1.05 billion in cash and issue its owners
2.45 million shares of Post stock.
The deal, expected to close by the third quarter, moves Post
closer to its cereal rivals, behemoths Kellogg and General Mills,
which together have some 65% of ready-to-eat cereal sales in the
U.S. With MOM, Post would have about 18%, it said.
Kellogg and General Mills have lamented the struggles with
selling cereal in the U.S., trying everything from bringing back
nostalgic brands, upping innovation and adding protein and trendy
grains to classics like Cheerios. Still, Kellogg says it expects
cereal consumption in the U.S. to decline again this year.
Write to Annie Gasparro at annie.gasparro@wsj.com and Chelsey
Dulaney at Chelsey.Dulaney@wsj.com
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