ST. LOUIS (AP) — Private-label cereal maker Ralcorp Holdings Inc. said Thursday it will purchase Kraft Foods Inc.'s Post cereals unit, the nation's third largest with brands like Spoon Size Shredded Wheat and Post Raisin Bran.
The companies said the deal includes stock valued at $1.65 billion and that Ralcorp will also assume $950 million in debt, making the total deal worth about $2.6 billion.
Under terms of the deal, Kraft will first split off or spin off Post and its related assets to Kraft shareholders.
The Post cereals business would then be combined with Ralcorp. Kraft shareholders would own about 54 percent of the new Ralcorp when the deal is complete, with Ralcorp shareholders owning about 46 percent.
The Post cereal business generated 2006 sales of $1.1 billion. Its brands also include Honey Bunches of Oats, Pebbles, Post Selects and Grape Nuts.
''This is a transforming event for Ralcorp,'' said David P. Skarie, co-chief executive officer and president of Ralcorp, who will be responsible for Post after the transaction is closed.
''The addition of Post cereals gives Ralcorp a truly distinctive line of branded cereal products plus a branded infrastructure and platform that we can build on through organic growth and acquisitions,''
He said Post's existing marketing and sales support team will continue to be based in New Jersey, and its existing R&D team will continue to be located in Battle Creek, Mich.
Northfield, Ill.-based Kraft said the deal allows it to better focus on its own growth strategy.
The transaction will boost Ralcorp's 2007 sales by 50 percent to $3.3 billion a year from $2.2 billion, with Post cereals accounting for about 32 percent of total annual sales.
The deal is expected to close in mid-2008, subject to regulatory and Ralcorp shareholder approvals. Kraft will provide transition services for up to 18 months after closing.
The expanded Ralcorp will include the Post cereal manufacturing plants in Battle Creek, Mich.; Jonesboro, Ark.; Modesto, Calif.; and Niagara Falls in Canada. Ralcorp will retain employees at these facilities.