Kraft Exploring Sale of Post Cereals -- WSJ

Kraft Foods has begun to seek a buyer for its Post cereals unit, the Wall Street Journal reported Thursday. The Journal identifies Pepsico as a "logical bidder," since its Quaker unit owns Cap'n Crunch and Life cereals. A month ago, Pepsico's Chairman and CEO Indra Nooyi said the company has a "robust" pipeline of acquisitions in the works (see full transcript), though the company has declined to say whether or not it is in talks with Kraft. Unidentified sources told the Journal the Post unit could be sold for up to $3 billion. Kraft has sent financial information on Post to several prospective buyers, possibly including General Mills and private-label food manufacturer Ralcorp Holdings. Post cereals cater to both adult and children's markets, with offerings ranging from Grape Nuts and Raisin Bran to Cocoa Pebbles and Alpha-Bits. Activist investor Nelson Peltz, who holds a 3% stake in Kraft, has urged CEO Irene Rosenfeld to sell Post cereals. The Journal notes that the cooling of the LBO market might encourage corporate acquisitions like this one, since companies no longer have to compete with private equity firms that drive up deal prices.

Sources: Wall Street Journal
Commentary: Kraft Foods Jumps On Reports of Peltz's 3% Stake • Kraft Foods Shares Rise On Reports of Icahn Stake, Peltz Meeting • Buffett Takes a Stake in Kraft
Stocks/ETFs to watch: KFT, PEP, RAH, GIS. Competitors: K. ETFs: PRFG, FXG, UGE
Earnings call transcripts: Kraft Q2 2007

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