US cereal company Post Holdings Inc agreed to buy Weetabix Ltd from China’s Bright Food Group Co Ltd (光明食品) for ￡1.4 billion (US$1.77 billion), adding the British breakfast staple to a portfolio that includes Grape Nuts and Honey Bunches of Oats.
The deal for the maker of oval-shaped cereal bricks gives Post a stronger presence in the UK, which accounted for four-fifths of Weetabix’s revenue of ￡346 million in the year ended Jan. 2 last year, financial statements showed.
The purchase “continues our strategy of strengthening our portfolio in stable categories and diversifying into new markets, bringing much-loved brands to significantly more customers globally,” Post CEO Rob Vitale said in a statement yesterday.
The acquisition is the latest in a series of deals reshaping the packaged food industry, with British companies attracting outsize interest after the pound’s plunge in the wake of the vote to leave the EU reduced prices for overseas buyers.
Unilever NV has put its ailing spreads business up for sale after rebuffing an approach from Kraft Heinz Co, while Reckitt Benckiser Group PLC is considering a sale of its French’s unit after agreeing to buy infant formula maker Mead Johnson Nutrition Co.
Post said Weetabix, which also owns Alpen muesli and other brands, would contribute about ￡120 million of adjusted earnings before interest, taxes, depreciation and amortization annually before expected cost savings of roughly ￡20 million by the third full fiscal year after closing.
The British company’s total sales last year dropped 1.6 percent and profit fell 15 percent to ￡84.6 million.
Bright Food moved to sell Weetabix after owning it for five years, during which it struggled to generate interest in cold cereals among Chinese consumers. It floated the idea of listing Weetabix in 2014, but the brand never gained enough traction in China, where consumers traditionally eat hot breakfast foods such as congee.
“We can see that demand for cereals is growing due to health consciousness, especially among female consumers exposed to Western lifestyles, but Weetabix did not make much inroads, probably because Bright Food does not have experience in this area,” Euromonitor International research manager for packaged food Du Jiaqi (杜佳琪) said in Shanghai.
China’s breakfast cereal market was last year worth US$933 million, with ready-to-eat cereals such as Weetabix accounting for about one-quarter of that total, Euromonitor said.
Overseas acquisitions remain an important part of Bright Food’s strategy to become an “internationally influential, multinational company,” spokesman Pan Jianjun (潘建軍) said by telephone.
Bright Food, whose 2012 deal valued the cereal maker at about ￡1.2 billion, owns a 60 percent stake in Weetabix, while Baring Private Equity Asia Ltd holds the remaining 40 percent.
Barclays PLC, Rabobank Groep NV, Credit Suisse Group and Nomura Group acted as financial advisers to Post, the US company said, adding that it expects the deal to be completed in the third quarter of this year.
The US cereal maker also forecast net sales of about US$1.25 billion in the second fiscal quarter ended March 31, with a net loss of about US$4 million, in reporting preliminary, unaudited financial data.
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