UPDATE: Sept. 23, 2019: Post filed to list its Active Nutrition business under the name BellRing Brands with the symbol BRBR.
- Post announced yesterday that it filed a draft registration statement to IPO its Active Nutrition business. The company said in November that it hoped to go through with this spin-off this fiscal year.
- The filing is confidential and still subject to review. This initial step does not provide the number of shares of stock or the price range. Last year, Post said it plans to sell about 20% of the ownership of the new public company.
- Post’s Active Nutrition segment includes brands like PowerBar and Joint Juice. As a business unit, these functional brands have been growing at an annual rate of 30% since 2014, the company said in a separate release.
In its second attempt at an IPO since the beginning of 2018, it’s clear that Post is looking to shed some of its brands and narrow its focus down to its core business of cereal and refrigerated foods. Last March, the cereal maker also filed`a draft registration to IPO its private label business.
Although Post is best known for breakfast staples like Grape Nuts, Honey Bunches of Oats and Fruity Pebbles, cereal manufacturers have been struggling with less demand in general, with many time-strapped consumers finding cold cereal too time-consuming for the average morning. Post has been innovating with new — often extremely sugary — cereal brands and flavors. Their efforts have paid off. In Post’s 2018 financial summary, net sales for the segment that includes its hallmark cereals came to $1.3 billion in the last year, an increase of 5% from 2017.
Nevertheless, other segments of the business are doing better. Refrigerated foods, which is now the company’s largest segment, net sales were $2.3 billion in 2018, an increase of 25% compared to 2017. Active Nutrition saw $827.5 million in sales last year, a bump of 16%. Overall, the company says net sales for the Active Nutrition business have increased at an annual rate of 30% since 2014.
Couple the growth in the Active Nutrition segment with the fact that the U.S. market for nutritional shakes and bars exceeded $9 billion in 2016 — and sales for the category are expected to rise 8.3% annually through 2021 — and it's curious that Post would be wanting to sell off such growth potential.
However, a quick look at the potential success of the strategy may offer some clarity as to why Post is keen to IPO rather than divest the brands. When Kraft Heinz spun off Mondelez in 2012, it was anyone’s guess that seven years later, it would become a cash generation machine with analysts often saying it is seemingly immune to the problem that consumers are shopping in center aisles less.
If Post could successfully spin off its Active Nutrition segment to the same effect, holding an 80% stake in the company would prove to be a sweet investment. It's also worth noting that Post President and CEO Rob Vitale said in a recent earnings call that Post is looking to spin off the brand to initially retire term debt. A look at the company's Q4 earnings report shows how critical that strategy is. Expenses for fiscal year 2018 increased to $975.2 million from $867.4 million, mainly due to costs related to the two major acquisitions it made in 2017 — Weetabix and Bob Evans grocery products.
Still, Post has had trouble with IPOs in the past. Last year, no one wanted to buy its private label business. In the end, the New York Post reported that the company spun off the division and sold a minority stake of 39.5% to Boston private equity firm Thomas H. Lee Partners.
Perhaps this time around, having a track record of fast growth in a segment that is popular in the market will inspire investors to take a bite.
Correction: In a previous version of this article, Post's expenses from 2017 were misstated. Expenses increased by $107.8 million from $867.4 million in 2017 to $975.2 million in 2018.