- Post Holdings said it would transfer its private label business to a new subsidiary and get $250 million from Thomas H. Lee Partners who would retain a 39.5% stake. The new company would be named 8th Avenue Food & Provisions, with Post retaining 60.5% of the business. 8th Avenue and Thomas H. Lee Partners would assume $625 million in debt from Post.
- Separately, Post said net sales during its most recent quarter rose 26.4% to $1.6 billion. Net income was $96.5 million compared to a net loss of $59.4 million in the prior year.
- The St. Louis-based company said sales in its ready-to-eat cereal division were $466.4 million for the third quarter, an increase of 9.2%, or $39.1 million. Sales in its refrigerated foods segment, which closed its purchase of Bob Evans Farms in January, rose 32% to $613.1 million.
Post has undergone a rapid overhaul that has left the company in a better position to compete in the rapidly changing food space. After purchasing Weetabix last year for $1.8 billion and frozen food producer Bob Evans in January for $1.53 billion, the CPG company is showing that its decision to grow beyond cereal through M&A is proving to be a successful strategy — and one that could smartly remain a go-to option for the company.
The Wall Street Journal reported that Robert Vitale, the company's CEO, said in a conference call that the company would continue to look for acquisitions, but that ongoing work with its private label business and recent deals mean it would be “a lower near-term priority.” Still, he said that "be assured that if a great opportunity develops, we will respond.”
While its competitors like General Mills and Kellogg continue to struggle with cereal, Post showed signs of growth in the latest quarter. This sales bump showed the company’s recent resurrection of its Oreo O's sugary cereal and the introduction of Chips Ahoy! and Nutter Butter cereals has successfully appealed to the consumer's search for nostalgia and indulgence in their snack choices. Post also is benefiting from the surge in demand for frozen foods. It's likely a major reason why Post purchased Bob Evans, along with giving the food manufacturer a way to diversify beyond cereal.
Post is clearly succeeding in resurrecting its cereal operations and riding the resurgence facing frozen foods. Its decision to transfer its private label business — where sales rose 8.7% in the quarter to $209.1 million — to a new subsidiary and then get nearly $900 million in cash gives it new ammo to improve its own brands or look outside for more deals. It's evident that Post's strategy is working.
While competitors in the food space like General Mills, Kraft Heinz and Campbell Soup have watched their stocks slide in the last year, Post's has risen roughly 8% — a huge feat given the challenges facing large food companies as consumers move away from the center of the store toward more fresher, better-for-you foods. Post's shares were up 8.3% to $93.90 in mid-morning trading.