Post Holdings has entered the US pet-food market by acquiring several brands from local manufacturer J.M. Smucker.
The deal is worth around US$1.2bn and centres on six brands – Rachael Ray, Nutrish, 9Lives, Kibbles’n Bits, Nature’s Recipe and Gravy Train. Together, those brands generated $1.4bn in net sales in the year to 30 April 2022.
The transaction also includes three factories – two in Pennsylvania, one in Kansas.
Under the terms of the deal, Post is to pay $700m in cash and issue J.M. Smucker around $500m of shares in its business.
More than 1,000 employees will move to Post, J.M. Smucker said.
“We expect this acquisition to continue our history of creating value with a buy-and-build approach to categories. These iconic brands are ideally suited to this strategy,” Post president and CEO Rob Vitale said.
J.M. Smucker remains in the US pet-food market with brands such as Milk-Bone, Meow Mix and Milo’s Kitchen.
“This divestiture supports our strategy to prioritise investments and resources in the areas of our business that offer the strongest growth and profit potential,” said Mark Smucker, CEO of J.M. Smucker. “Portfolio optimisation and strategic resource allocation remain key drivers of our long-term growth.”
Post is a major US food manufacturer, with its portfolio mainly focused on breakfast cereal, eggs, and frozen food. It owns cereal brands such as Weetabix, Alpen and Pebbles, and is in the egg market with brands including Easy Eggs and Abbottsford Farms.
J.M. Smucker’s presence in consumer food and beverage includes products in spreads, frozen food and coffee.
Alexia Howard, an equity analyst covering J.M. Smucker for AllianceBernstein, said: “With the [company’s] pet-food segment expected to generate $3.04bn in sales in fiscal year 2023, the divestment will roughly halve the size of the segment but presumably will boost segment margins substantially, since the divested business has a substantially lower margin than the 15.3% EBIT margin expected to be generated by the pet food business in FY23.”
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