Post Holdings Inc. will acquire breakfast cereal maker Weetabix Food Co. from China's Bright Food Group in a deal valued at $1.76 billion. "Combining together two category leaders continues our strategy of strengthening our portfolio in stable categories and diversifying into new markets," said Post Holdings CEO Rob Vitale.
The move will help Post's existing brands, such as Honey Bunches of Oats and Grape-Nuts, to expand overseas, while allowing for greater distribution of Weetabix and its Barbara's brand in North America, the St.Louis-based company said on April 18.
Purchasing Weetabix's manufacturing and distribution assets in Europe should also allow Post to more easily add other overseas businesses that might become available in cereal and beyond, Vitale said. "What this does is allow us to look at a broader array of opportunities," he told analysts, noting that Post regularly checks on merger and acquisition opportunities.
Founded in 1932, Weetabix holds the number-two overall position in the U.K. ready-to-eat cereal category. The iconic brand also includes Alpen (Britain's top muesli brand), Barbara’s, Weetos and Ready Brek. In North America, Weetabix operates a leading natural and organic RTE cereal and snacking platform in both branded and private label, led by Barbara’s and the Puffins sub-brand and serves leading natural and specialty channel and conventional retailers.
The sale follows five years after Shanghai-based, state-owned Bright Food took control of Weetabix for 1.2 billion pounds. Since then, Weetabix has struggled to grow significantly as cold cereals in Western markets experience heated competition from breakfast bars, granola, Greek yogurt and others, while consumers grow more concerned about how much sugar is in what they eat.
Vitale reported that Weetabix had revenue in 2016 of 410 million pounds, which wasn't much higher than in 2015. He projected that Weetabix's revenue would remain flat, with earnings being boosted by cost savings from combining the businesses.