Post Holdings to Acquire Michael Foods for $2.45 Billion

April 22, 2014
Post adds $2.0 billion revenue "in attractive categories."

Post Holdings Inc., St. Louis, the parent of Post Foods, on April 17 announced it has agreed to acquire MFI Holding Corp., parent of Michael Foods, from affiliates of GS Capital Partners, affiliates of Thomas H. Lee Partners and other owners. The price is $2.45 billion.

Michael Foods, Minnetonka, Minn., manufactures products for foodservice, retail and food ingredient channels. It's especially strong in value-added egg products, refrigerated potato products and cheese and other dairy case products. Its brands include Papetti's, All Whites, Better 'n Eggs, Easy Eggs, Simply Potatoes and Crystal Farms.

The parties said Michael Foods has grown significantly in recent years, with revenues now approaching $2 billion. As recently as 2010, when it still was a public company, Michael Foods reported a loss of $31 million on sales of $1.6 billion. Since 2008, the parties say, earnings have grown at a compound annual growth rate of 5.3 percent. On April 16, Michael Foods management announced it expects adjusted earnings for the quarter ended March 29 to be approximately $48 million. Post management expects Michael Foods profit for calendar 2014 to be $255-270 million.

The transaction is expected to be completed in the second calendar quarter of 2014.

Although Post has been on an acquisition binge of late, Michael Foods will be Post's largest buy to date. The company said "it continues Post's strategy of investing in large secular themes in the food industry. Post remains focused on diversifying its business to capitalize on shifts in consumer behavior towards increased consumption of protein and away-from-home breakfast occasions."

Just this year, Post completed purchases of Golden Boy Foods and Dymatize Enterprises and is closing on acquisitions of PowerBar and Musashi, the latter an Australian sports nutrition company.

Although it dates back to one of the original 19th century cereal companies, Post itself is the product of acquisition and divestiture. Until 2008, it was part of Kraft Foods, which sold it to Ralcorp, which spun the business off in early 2012 to avoid Ralcorp being taken over by ConAgra (which happened anyway).

Michael Foods will continue to be managed by its existing executive team. CEO Jim Dwyer said, "The entire Michael Foods team is excited to join Post Holdings. We believe our business will benefit from Post's portfolio management approach of effectively and efficiently investing in profitable growth and margin expansion. I'm delighted to be joining the Post team."

"This acquisition is exactly what we look for in an investment," said Bill Stiritz, Post's chairman and CEO. "We are extremely impressed with the job Jim and his team have done and we look forward to continuing to build this substantial business with them."

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