U.S. cereal company Post Holdings (POST.N) has agreed to buy British brand Weetabix from China’s Bright Food Group Co Ltd [SHMNGA.UL] in a 1.4 billion pound ($1.76 billion) deal that will expand its international business, the companies said on Tuesday.
The deal will add the Weetabix, Alpen and Barbara’s brands to a portfolio of cereals including Honey Bunches of Oats and Grape-Nuts. It will allow for expanded distribution of Post products in a number of international markets while expanding Weetabix and Barbara’s in North America.
“Combining together two category leaders continues our strategy of strengthening our portfolio in stable categories and diversifying into new markets,” said Rob Vitale, Post’s chief executive, in a statement.
Weetabix is Britain’s second-largest ready-to-eat cereal maker overall, and Weetabix is the nation’s top-selling brand.
The sale marks the end of Chinese ownership of Weetabix after state-owned Bright Food took control of the company from Lion Capital in 2012 amid a major overseas push stretching from Australia to Israel.
Bright agreed to buy a 60 percent stake in Weetabix in 2012 from private equity firm Lion Capital in a deal that valued it at 1.2 billion pounds. Baring Private Equity Asia subsequently bought Lion’s remaining stake in 2015.
Post said the deal will immediately add to its adjusted operating profit margins and its free cash flow, excluding one-time transaction expenses.
Post also affirmed its 2017 outlook and reported financial results for the second quarter ended March 31. It posted net sales of $1.25 billion and a net loss of $4 million.
It said it still expects 2017 adjusted earnings before interest, tax, depreciation and amortization (EBITDA) of $920 million to $950 million, excluding any contribution from Weetabix.
HISTORIC BRAND
The sale did not signal the end of Bright’s international ambitions, Shanghai-based Bright spokesman Pan Jianjun said.
“This is a part of our internationalization strategy. Selling assets enables us to better expand. Going forward Bright will stick to our overseas push,” he said.
Reuters reported in January that Post Holdings, the No.3 U.S. cereal company, was among four interested parties vying for Weetabix, a business founded 85 years ago.
Bright hired Goldman Sachs to run an auction for the well-known British brand less than five years after the Chinese company agreed to take control of it, with sources familiar with the matter saying Bright it had struggled to crack the Chinese market, where many consumers tend to eat hot breakfasts.
Weetabix had earnings before interest, tax, depreciation and amortization (EBITDA) of 130 million pounds in 2016, Reuters reported in December.
Bright Food is the parent firm of a number of listed companies including Bright Dairy and Food Co Ltd.
Source: Reuters.com