Written by BNN.ca
U.S. cereal company Post Holdings Inc. (NYSE: POST) has agreed to buy Weetabix Ltd. from Bright Food Group Co. of China for 1.4 billion pounds (US$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.
Post Chief Executive Officer Rob Vitale said in a statement Tuesday
“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.”
RESHAPING PACKAGED FOOD
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. (Nasdaq: KHC), 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% last year, and profit fell 15% 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.