Strategy

Post Buys Bob Evans to Expand Breakfast Items

The $1.5 billion deal furthers Post's strategy of broadening its portfolio of brands amid slowing demand for cereal in the U.S.
Matthew HellerSeptember 20, 2017

With its $1.8 billion purchase of the Weetabix cereal brand pending, Post Holdings has announced it will acquire Bob Evans Farms for $1.5 billion to add pork sausages and frozen foods to its portfolio.

As The Financial Times reports, Rob Vitale, Post’s ambitious CEO, “has been seeking to consolidate parts of the cereals, snacks and protein bars markets through a series of deals since the company was spun out of Ralcorp Holdings in 2012.”

The acquisition of Bob Evans gives the maker of such cereals as Grape-Nuts, Raisin Bran, and Honey Bunches of Oats a portion of the breakfast sausage market in addition to boosting its presence in commercial food service.

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Post said Tuesday it had agreed to pay $77 a share for Bob Evans, a 5.6% premium to the company’s closing price on Monday of $72.93 .

“The addition of Bob Evans’ highly complementary portfolio of brands and products will meaningfully enhance Post’s refrigerated side dish offering, provide Post with a presence in breakfast sausage and will immediately provide Post with a leading position in the higher growth perimeter of the store,” the company said in a news release.

Amid slowing demand for breakfast cereals in the U.S. — sales have dropped 9% since 2012 — Post recently moved to strengthen its cereal offering through the Weetabix deal. It also bought MOM Brands, another large US cereal group and the maker of Malt-O-Meal, in 2015.

Bob Evans sells its frozen foods, including refrigerated potato, pasta, and pork sausages, under Bob Evans, Owens, Country Creek and Pineland Farms brands. In January, it sold its restaurant division to private-equity giant Golden Gate Capital for $565 million to focus on its faster-growing packaged foods business.

The foodservice business represents about 35% of Bob Evans’ sales volume.

The sale to Post “creates enhanced and certain value for our stockholders, while providing further resources and reach to deliver the Bob Evans experience to a broader audience of consumers and retailers,” CEO Mike Townsley said.