Post's Weetabix Deal: Great Grains Or Shredded Wheat?

Bruder Capital, LLC profile picture
Bruder Capital, LLC


  • The $1.8 billion Weetabix acquisition is a very different kind of deal for POST.
  • That's made POST stockholders more than a bit ambivalent.
  • Here's "Honey Bunches of Notes" on the deal and prospects for POST's debt and equity.

Post Holdings Inc. (NYSE:POST) is adding international flavor to its cereal. On Tuesday, the St. Louis, Missouri, based consumer packaged goods company announced it will pay £1.40 billion (or $1.79 billion) to buy UK-based whole grain cereal maker Weetabix Ltd. The Weetabix ready-to-eat (or RTE) cereal brand is the number one ready-to-eat (or RTE) cereal brand in the UK and Alpen is the number one muesli brand in the UK. Weetabix also makes the Barbara's, Weetos and Ready Brek cereals.

The transaction is a significant geographic expansion for POST which is best known in financial circles as the 3rd largest cereal maker in the US behind General Mills (GIS) and Kellogg Co. (K) and, to US consumers, as the maker of Honey Bunches of Oats, Honeycomb, Pebbles and Malt-O-Meal cereals. Weetabix has an existing North American business which sells natural and organic RTE cereal and snacks, both branded and private label, including Barbara's and the Puffins sub-brand. It serves leading US natural, specialty channel and conventional retailers. Weetabix does extensive international business, with operations in Africa through two joint ventures and a distribution export business to over 90 countries. The sellers in this transaction - Bright Food Group Co Ltd and Baring Private Equity Asia - have owned Weetabix since FY'12. POST has agreed in principle to establish a JV with Bright Food Group and Baring Private Equity Asia to manage the Weetabix China operations.

The deal announcement came as no surprise since rumors about a pending transaction had circulated in the market for months beforehand. The Telegraph reported in early January that there were multiple bids for Weetabix and then reported in March that POST was the most likely buyer. However, the price paid by POST to beat the other bidders, including GIS, looks high. On its face, paying £1.4 billion for £120 million Adjusted EBITDA translates

This article was written by

Bruder Capital, LLC profile picture
Three decades of capital markets experience: institutional trader for Lehman Brothers, M&A banker at Merrill Lynch, research, sales and trading positions at KeyBanc, RBC Capital Markets, and BNP Paribas, private equity valuation consultant for PwC.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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