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Post Holdings (POST) to Acquire Rachael Ray® Nutrish, Nature’s Recipe and Other Select Pet Food Brands from The J.M. Smucker Co. (SJM)

February 8, 2023 4:38 PM

Post Holdings, Inc. (NYSE: Post) (“Post”), a consumer packaged goods holding company, announced today it has signed a definitive agreement in which Post will acquire select pet food brands from The J.M. Smucker Co. for $1.2 billion. The transaction includes leading dog and cat food brands such as Rachael Ray® Nutrish®, Nature’s Recipe®, 9Lives®, Kibbles ‘n Bits® and Gravy Train® (the “Pet Food Brands”), which together generated net sales of $1.4 billion in the year ended April 30, 2022. Post also is acquiring manufacturing and distribution facilities in Bloomsburg, Pennsylvania and manufacturing facilities in Meadville, Pennsylvania and Lawrence, Kansas (such facilities together with the Pet Food Brands, the “Pet Food Business”).

The acquisition will provide Post with a compelling entry point into the attractive and growing pet food category. Post is acquiring an established, scaled position in the mainstream and entry premium sub-categories. Post management expects there to be additional opportunities for future investments in the pet food category.

“We expect this acquisition to continue our history of creating value with a buy and build approach to categories. These iconic brands are ideally suited to this strategy. Most importantly, I am delighted to welcome the over 1,000 talented people who will join us as Post colleagues,” said Rob Vitale, President and Chief Executive Officer of Post.

Upon closing of the acquisition, Post expects to create a new pet food platform within Post Consumer Brands. Nicolas Catoggio will continue in his current role as President and Chief Executive Officer of Post Consumer Brands and will expand his responsibilities to include management of both the North American ready-to-eat (“RTE”) cereal and peanut butter business and the new Pet Food Business.

The transaction is expected to be completed early in the second calendar quarter of 2023, Post’s third quarter of fiscal year 2023, subject to closing conditions, including the expiration of waiting periods under United States (“U.S.”) antitrust laws.

Financial Details

Post will acquire the Pet Food Business for $1.2 billion on a cash-free, debt-free basis, subject to an inventory adjustment. Under the terms of the agreement, at closing Post will pay $700 million in cash and issue to The J.M. Smucker Co. approximately $500 million of new shares of Post common stock (approximately 5.4 million new shares of Post common stock). Post expects to fund the cash portion of the purchase price with a combination of cash on hand and through borrowings under its existing revolving credit facility. The transaction is expected to be leverage neutral; upon closing of the transaction, Post’s pro forma net leverage ratio* is expected to be approximately 5.2x.

Post management expects the Pet Food Business to contribute approximately $100 million of adjusted EBITDA* in the next twelve months following the close of the acquisition, before the realization of cost synergies, which Post management expects to be approximately $30 million annually by the third full fiscal year post-closing, resulting from benefits of scale across logistics, procurement and administrative services. One-time costs to achieve synergies are estimated to be approximately $75 million. Additionally, Post expects the transaction to result in a tax benefit to Post with a net present value of approximately $120 million. The transaction is expected to be immediately accretive to Post’s free cash flow*, excluding one-time transaction expenses. Post management expects the Pet Food Business to generate substantial incremental free cash flow, complementing Post’s cash generation-focused business model and preserving Post’s flexibility to manage its capital structure.

* For additional information regarding non-GAAP measures, such as Adjusted EBITDA and free cash flow, see the related explanations presented under “Use of Non-GAAP Measures” later in this release.

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Corporate News Mergers and Acquisitions

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