Ralcorp to sell 20% stake in cereal firm Post to settle debt

US-based food manufacturer Ralcorp has agreed to divest its remaining 20% stake in cereal producer Post to settle $200m of outstanding debt as part of a credit agreement.

The 20% stake represents 6.8 million shares of the common stock of Post, which was spun-off from Ralcorp in February 2012 as a stand-alone public company.

In addition, Post has agreed to repurchase 5% of its shares from Ralcorp – about 1.75 million shares at $30.50 each, for a total purchase price of $53.4m.

Ralcorp president and CEO Kevin Hunt said that the proceeds from the deal will help the company to pursue its growth through acquisition strategy, allowing it to create significant shareholder value.

With the agreement to divest the Post stake, and ongoing cost reduction efforts, Ralcorp is well positioned to implement its strategic plan and continue to deliver long-term sustainable growth, Hunt added.

This move comes after Ralcorp initiated a strategic restructuring programme in July 2012, aimed at generating annual pre-tax cost savings of approximately $26m to $31m in fiscal 2013.

Under the programme, Ralcorp will consolidate its existing cereal, pasta, and snacks, sauces and spreads businesses into a single centre-store private brand food company.

Ralcorp acquired the Post cereals business from Kraft Foods in 2007, in a deal worth $2.6bn, which also included a debt of $950m.

It could not turn around the Post Foods business, which saw a steady decline in annual sales from $1.07bn in 2009 to $968m in 2011.

Post produces ready-to-eat breakfast cereals under brands such as Honey Bunches of Oats, Honey Comb, Fruity/Cocoa Pebbles, Golden Crisp, Grape Nuts, Shredded Wheat, and Waffle Crisp.

Ralcorp produces a range of private-brand foods for various grocery, mass merchandise and drugstore retailers, as well as frozen bakery products that are sold to in-store bakeries, restaurants and other foodservice customers.

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Image: The deal to divest the 20% stake in cereal producer Post is part of Ralcorp’s plan to lower debt and pursue acquisitions. Photo courtesy of PRNewsFoto/Post Holdings, Inc.