Makers of Post Food cereals, Ralcorp Holdings has forged a $545 million deal with Sara Lee for its North American refrigerated dough business that includes private label toaster pastries, speciality biscuits, crescent rolls, pizza and pie crusts in the retail segment. The sale formalities and closure is expected by 2012.
The sale falls in line with Sara Lee's plans to split the company into two distinct units, separating its food company that includes North American meats from its international tea and coffee businesses. The sale, according to Marcel Smits, chief executive, Sara Lee, "will better enable our North American business to focus on its branded meats and frozen desserts products and establish a platform for a strong and independent future."
The Illinois based Sara Lee's proposed split is a trend seen in the food industry where companies are succumbing to the new notion that 'small is big' by retracting from earlier business models which leveraged themselves as single brand companies or single producers.
The manufacturer of Honey Bunches of Oats, Grape-Nuts and Post Raisin Bran, Ralcorp, in the meantime is hiving off its Post Foods cereal business. Acquiring Sara Lee's refrigerated dough business is expected to enhance its private brand business. The proceeds from the Post Foods split is likely to plough back monies to pay up for the short-term debt funding that will fund the proposed new acquisition. Post Foods is the third-largest maker of breakfast cereal in the U.S.
Bloomberg reported that Ralcorp announced that its board of directors had agreed in principle to separate Ralcorp and Post Foods in a tax-free spinoff to Ralcorp shareholders. The separation is expected to occur within six months and a committee has been formed to search for a CEO for Post.
Bloomberg had reported that Ralcorp explored selling Post to fend off a $4.9 billion bid from ConAgra Foods Inc. Ralcorp plans to issue as much as $1.2 billion of debt, with Ralcorp getting about $1 billion of the proceeds, the company announced. Ralcorp intends to use the funds to repay debt, make acquisitions and buy back shares.
The Sara Lee refrigerated dough business raked in $300 million in revenue last year. The company has about 700 employees spread across manufacturing plants in Forest Park, Ga. and Carrollton, Tex.
North American Fresh Bakery Sara Lee Corporation's leading brands are household names known around the globe. The prominent brands in its food stable include Ball Park, Douwe Egberts, Hillshire Farm, Jimmy Dean, Senseo and its namesake, Sara Lee.