Cereal maker Post Holdings (POST) said it would acquire privately held rival MOM Brands for about $1.15 billion to expand in the growing bagged and hot cereal categories, sending its shares up as much as 9 percent on Monday.
The maker of Raisin Bran and Honey Bunches of Oats will pay $1.05 billion in cash and issue 2.5 million shares to the owners of MOM Brands. MOM Brands -- whose ready-to-eat cereals and hot wheat and oatmeal products include Malt-O-Meal, Frosted Mini Spooners, Golden Puffs, Better Oats and Three Sisters -- had net sales of $760 million in the year ended Dec. 27. The 95-year-old company is owned by the descendants of its founder John Campbell.
U.S. sales of bagged cereals grew 5.6 percent annually in the past four years, even though overall sales of cereals fell, Post said, quoting data from Nielsen. Post said the combined company would have an 18 percent share of the U.S. ready-to-eat cereals market. Kellogg (K) had a 32 percent market share in 2014 and General Mills (GIS) had 31 percent, according to Nielsen data.
Post, which was spun off from Ralcorp Holdings in 2012, has been aggressively pursuing deals to diversify, buying small companies ranging from peanut butter maker Golden Boy Foods to dietary supplements company Premier Nutrition. Post bought egg and dairy producer and distributor Michael Foods for $2.45 billion last year. ConAgra Foods (CAG) acquired Ralcorp in January 2013. acquired Ralcorp in January 2013.
Post also estimated net sales of about $1.07 billion for the first quarter ended Dec. 31, in line with the average analyst estimate, according to Thomson Reuters I/B/E/S. The transaction is expected to close by the third quarter of 2015, Post said.