Post Nears $1.76 Billion Deal for WeetabixBloomberg News
U.S. cereal maker to strengthen foothold in U.K. market
Bright Food struggled to gain traction in China for cereals
U.S. cereal company Post Holdings Inc. agreed to buy Weetabix Ltd. from Bright Food Group Co. of China for 1.4 billion pounds ($1.8 billion), adding the British breakfast staple to a portfolio that includes Grape Nuts and Honey Bunches of Oats.
The deal for the maker of oval-shaped cereal bricks gives Post a stronger presence in the U.K., which accounted for four-fifths of Weetabix’s 346 million pounds of revenue in the year ended Jan. 2, 2016, according to financial statements.
The purchase “continues our strategy of strengthening our portfolio in stable categories and diversifying into new markets, bringing much-loved brands to significantly more customers globally,” Post Chief Executive Officer Rob Vitale said in a statement Tuesday.
The acquisition is the latest in a series of deals reshaping the packaged-food industry, with U.K. companies attracting outsize interest after the pound’s plunge in the wake of the vote to leave the European Union reduced prices for overseas buyers. Unilever has put its ailing spreads business up for sale after rebuffing an approach from Kraft Heinz Co., while Reckitt Benckiser Group Plc is considering a sale of its French’s Foods unit after agreeing to buy infant-formula maker Mead Johnson Nutrition Co.
Post said Weetabix, which also owns Alpen muesli and other brands, will contribute about 120 million pounds of adjusted earnings before interest, taxes, depreciation and amortization annually before expected cost savings of roughly 20 million pounds by the third full fiscal year after closing.
The British company’s total sales dropped 1.6 percent last year, and profit fell 15 percent to 84.6 million pounds.
Bright Food moved to sell Weetabix after owning it for five years, during which it struggled to generate interest in cold cereals among Chinese consumers. It floated the idea of listing Weetabix in 2014, but the brand never gained enough traction in a country where consumers traditionally eat hot breakfasts like congee.
“We can see that demand for cereals is growing due to health-consciousness, especially among female consumers exposed to western lifestyles, but Weetabix did not make much inroads, probably because Bright Food does not have experience in this area,” said Jiaqi Du, research manager for packaged food at Euromonitor International in Shanghai.
China’s breakfast cereal market was worth $933 million in 2016, according to Euromonitor, with ready-to-eat cereals like Weetabix accounting for about one-quarter of that total.
Overseas acquisitions remain an important part of Bright Food’s strategy to become an “internationally influential, multinational company,” spokesman Pan Jianjun said by phone.
Bright Food, whose 2012 deal valued the cereal-maker at about 1.2 billion pounds, owns a 60 percent stake, while Baring Private Equity Asia Ltd. holds the remaining 40 percent.
Barclays, Rabobank, Credit Suisse and Nomura acted as financial advisers to Post, the U.S. company said. It expects the deal to be completed in the third quarter.
The U.S. cereal maker also forecast net sales of about $1.25 billion in the second fiscal quarter ended March 31, with a net loss of around $4 million, in reporting preliminary, unaudited financial data.
— With assistance by Rachel Chang, Aaron Kirchfeld, and Craig Giammona