St. Louis / MO. (pfh) Post Holdings Inc., a consumer packaged goods holding company in the United States, announced it has agreed to acquire Weetabix Limited from Shanghai based state owned enterprise Bright Food Group and an investment fund advised by Baring Private Equity Asia.
Weetabix is a leading United Kingdom based packaged food company that primarily produces ready-to-eat (RTE) cereal products spanning branded and private label. Founded in 1932, Weetabix holds the number two overall position in the UK RTE cereal category. Its portfolio includes the iconic Weetabix brand, which holds the number one brand position in the UK RTE cereal category, as well as Alpen (the number one muesli brand in the UK), 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 the Barbara’s brand and the Puffins sub-brand and serving leading natural and specialty channel and conventional retailers.
Additionally, Weetabix has an established and extensive international presence, with operations in Africa through two joint ventures and a distribution export business to over 90 countries. Post has agreed in principle to establish a joint venture with Bright Food Group and an investment fund advised by Baring Private Equity Asia to manage the Weetabix China operations.
«We have long admired Weetabix as a leader in cereal and believe it will be a fantastic strategic fit within Post», said Rob Vitale, Post’s President and CEO. «Combining together two category leaders continues our strategy of strengthening our portfolio in stable categories and diversifying into new markets, bringing much-loved brands to significantly more customers globally. We are excited about the growth opportunities that this acquisition brings».
The combination of Post and Weetabix creates a diversified international food company with substantial free cash flow generation, enabling Post to fund growth over the long-term, including international cross-selling opportunities through expansion of Post products in select international markets and further expansion of Weetabix and Barbara’s in North America.
At the closing of the transaction, Sally Abbott, Weetabix’s Director of Marketing, will become Managing Director of Weetabix UK and Ireland and report to Rob Vitale. Giles Turrell, Weetabix’s current CEO, will assume the newly created role of Chairman of Weetabix with responsibility for overseeing the integration of Weetabix into the Post portfolio. The other members of Weetabix’s existing management team will continue to lead the organization.
The transaction is expected to be completed in the third calendar quarter (Post’s fiscal fourth quarter), subject to the satisfaction of limited closing conditions, including the expiration of waiting periods under U.S. antitrust laws.
Financial Details
Post will acquire Weetabix for 1.4 billion GBP on a cash free, debt free basis, subject to certain adjustments as described in the purchase agreement. Post expects to fund the acquisition with a combination of cash on hand and through borrowings under its existing revolving credit facility and/or, subject to market conditions, a new senior secured term loan facility.
Post management expects Weetabix to contribute approximately 120 million GBP of adjusted Ebitda on an annual basis before the realization of cost synergies which Post management expects to be approximately 20 million GBP annually by the third full fiscal year post-closing, resulting from benefits of scale, shared administrative services and infrastructure optimization and rationalization. The transaction is expected to be immediately accretive to Post’s Adjusted Ebitda margins and free cash flow, excluding one-time transaction expenses.
Preliminary Unaudited Selected Financial Data for Q2/2017
Post has provided the following preliminary unaudited selected financial data for the second quarter of fiscal 2017 ended March 31, 2017, which should be read in conjunction with the financial statements and management’s discussion and analysis included in Post’s filings with the Securities and Exchange Commission (SEC), as well as the matters discussed under «Risk Factors» in Post’s Form 10-K for the fiscal year ended September 30, 2016 and Form 10-Q for the fiscal quarter ended December 31, 2016:
- Net sales of approximately 1.25 billion USD;
- Net loss of approximately 4 million USD; and
- Adjusted Ebitda of approximately 228 million USD.
The preliminary financial data discussed above consist of estimates derived from Post’s internal books and records and have been prepared by, and are the responsibility of, Post’s management, are based upon information available to management as of the date hereof, and have not been prepared with a view toward compliance with published guidelines of the SEC or the guidelines of the American Institute of Certified Public Accountants for the preparation or presentation of financial information. The preliminary estimates discussed above are subject to the completion of financial closing procedures, final adjustments and other developments that may arise between now and the time the financial results for the second quarter are finalized. Therefore, actual results may differ materially from these estimates and all of these preliminary estimates are subject to change. In addition, preliminary results for the second quarter are not necessarily indicative of operating results for any future period or results for the full year. Adjusted Ebitda is a non-GAAP measure.
Outlook
Post management has affirmed its fiscal 2017 Adjusted Ebitda guidance range of 920 to 950 million USD, excluding any contribution from Weetabix.
Post provides Adjusted Ebitda guidance and discloses its expectations as to the effect of the Weetabix transaction on Post’s Adjusted Ebitda, including the expected annual contribution of Weetabix, and free cash flow only on a non-GAAP basis and does not provide a reconciliation of its forward-looking non-GAAP guidance measures to the mostly directly comparable GAAP measures due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliations, including adjustments that could be made for non-cash mark-to-market adjustments and cash settlements on interest rate swaps, provision for legal settlement, transaction and integration costs, restructuring and plant closure costs, losses on assets held for sale, mark-to-market adjustments on commodity hedges and other charges reflected in the Company’s reconciliation of historic numbers, the amounts of which, based on historical experience, could be significant.
