Post Holdings To Buy Michael Foods For $2.45 Bln

(RTTNews) - Post Holdings, Inc. (POST), a consumer packaged goods holding company, has agreed to acquire MFI Holding Corp. or Michael Foods from affiliates of GS Capital Partners, affiliates of Thomas H. Lee Partners and other owners for $2.45 billion.

The combination is expected to create a diversified food company with substantial cash flow generation, enabling it to lower leverage and fund growth over the long-term.

The acquisition is Post's largest transaction so far. Post is focused on diversifying its business to make use of shifts in consumer behavior towards increased consumption of protein and away-from-home breakfast occasions.

The Wall Street Journal had reported the deal on Wednesday, adding that the acquisition, trumping a rival bid from Tyson Foods Inc. (TSN), could be announced as early as Thursday.

Post will also make a payment of $50 million on the first anniversary of the closing date, which is intended to represent the parties' estimate of the value of some tax benefits that Michael Foods is expected to realize from payments to be made by or on its behalf in connection with the acquisition.

Michael Foods is a producer of value-added food products and service solutions to customers across the food service, retail and food ingredient channels. It has leading market positions in categories such as value-added egg products, refrigerated potato products and cheese and other dairy case products.

Its well-known brands include Papetti's, All Whites, Better 'n Eggs, Easy Eggs, Simply Potatoes and Crystal Farms.

Packaged-food companies are under pressure to boost their revenues amid slack consumer spending and as consumers increasingly turn to healthier food options. In January, Post Holdings completed the acquisition of private label pasta manufacturer Dakota Growers Pasta Company.

Post had completed its acquisition of Golden Boy Foods Ltd. and Dymatize Enterprises, LLC in February, furthering its efforts to expand into the private label and active nutrition categories.

Minnetonka, Minnesota-based Michael Foods was bought in 2003 by Boston-based private equity firm Thomas H. Lee Partners, which sold an 80 percent stake in 2010 to the private equity arm of Goldman Sachs Group Inc. (GS).

The addition of Michael Foods is expected to increase Post's long-term revenue, Earnings Before Interest, Tax, Depreciation and Amortization or EBITDA and earnings per share growth potential.

The deal is expected to add to Post's earnings per share before giving effect to purchase accounting adjustments and one-time transaction expenses. Post management expects to recognize about $10 million in synergies from benefits of scale.

Michael Foods will continue to be managed by its existing executive team.

Jim Dwyer, Chairman and CEO of Michael Foods, said, ''We believe our business will benefit from Post's portfolio management approach and from our continued focus on the breakfast daypart, expanding egg consumption to all dayparts, and delivering convenient meal and snack choices to consumers."

Michael Foods has grown significantly in recent years. Post management estimates adjusted EBITDA for Michael Foods for calendar 2014 to be between $255 and $270 million.

The transaction is expected to be completed in the second calendar quarter of 2014, Post's fiscal third quarter.

Post has obtained financing commitments for the deal. Various lenders have committed to provide up to $1.765 billion in credit facilities, including a committed bridge loan of up to $340 million.

The firm plans to replace a portion of the committed financing with the sale of $500 million of additional equity or equity linked capital. Post also intends to amend its existing revolving credit facility.

The company expects to fund its pending acquisition of the PowerBar and Musashi brands with cash on hand or a draw under the amended revolving credit facility.

POST, which closed at $54.73 on Wednesday, is gaining 2 percent in pre-market activity.