TreeHouse Foods agrees to sell its cereal business to Post Holdings

US-based packaged foods manufacturer TreeHouse Foods has agreed to divest its ready-to-eat (RTE) cereal business to consumer packaged goods company Post Holdings.

Financial details of the deal have not been disclosed. According to Post, the acquisition is expected to be funded with cash on hand.

The RTE cereal business is based in St Louis, Missouri, and registered sales of approximately $260m in 2018.

According to the transaction, nearly 400 hourly and 100 salaried employees will be transferred to Post Holdings.

TreeHouse Foods CEO and president Steve Oakland said: “The ready-to-eat cereal category represents nearly $9bn in revenue at retail, and therefore, the business has a long runway for growth.

“We believe that the RTE business has a wonderful opportunity to flourish under Post’s ownership. Selling the ready-to-eat cereal business allows us to bring greater focus to the TreeHouse organisation and represents another step on our portfolio optimisation journey.”

The transaction is subject to customary closing conditions and is expected to take place in the third quarter of this year.

For this transaction, William Blair served as financial adviser and Winston & Strawn as legal adviser for TreeHouse Foods.

The RTE cereal business, which was acquired by TreeHouse from ConAgra Brands in 2016, has three manufacturing plants in Lancaster in Ohio, Sparks in Nevada, and Battle Creek, Michigan.

As previously disclosed, TreeHouse expects to close the Battle Creek plant in the third quarter of this year.

The acquired business will join Post’s existing North American RTE cereal business, Post Consumer Brands.

In another development, TreeHouse has announced its intention to close its Minneapolis, Minnesota facility, which produces snack nuts and trail mix.

The closing of the facility is predicted to take place in the third quarter of this year and is expected to affect nearly 120 employees. TreeHouse noted that the employees were notified about the closure of the facility well in advance in order to ensure a seamless transition for customers.

By closing its Minneapolis facility, the company intends to streamline the operational footprint of its snacks division. It also noted that the strategic review of its premium nuts and trail mix business is currently in progress.