- Post Holdings announced Tuesday it will acquire Bob Evans for $77 per share in a deal valued at $1.53 billion.
- Cost synergies are expected to be about $25 million annually by the third year after closing. Post said it looks for the purchase to add revenue growth and free cash flow immediately after closing, which is planned for the first quarter of 2018.
- “Combining with Bob Evans expands our portfolio of top brands and gives Post a leading position in the perimeter of the store. We look forward to welcoming the talented Bob Evans team to Post and working to create a successful future together," Post President and CEO Rob Vitale said in the statement announcing the deal.
This is the second major acquisition for Post Holdings this year. The first was its $1.7-billion purchase of U.K. RTE cereal brand Weetabix. The Bob Evans deal diversifies the St. Louis-based company by adding a leading brand in refrigerated side dishes and increasing its presence in the higher-growth store perimeter.
Bob Evans, which sold its restaurants earlier this year to Golden Gate Capital in order to focus on food products, has seen recent sales bumps from its sausage products and in refrigerated side dishes from its recently acquired Pineland Farms Potato.
Even without its famous restaurants, the company was highly valued as a standalone business and considered a potential acquisition target for companies on the watch for M&A possibilities.
Post's recent performance hasn't been as good. The company reported a 2% decline in its RTE cereal business for the second quarter of 2017 and the slump continued into the third quarter. At the same time, Post's Active Nutrition segment experienced healthy gains, and net sales for the category rose 20.9% in Q3, boosted by growth in shake products.
Going forward, Post plans to combine its existing refrigerated retail egg, potato and cheese business with Bob Evans, establishing a refrigerated retail business within the company to be led by current Bob Evans President and CEO Mike Townsley.
This deal seems to make sense for both parties since it diversifies Post Holdings' overall portfolio and joins the larger company's side businesses to similar lines where Bob Evans is already strong. Look for the first earnings report including the combined companies' performance to tell the tale.