Post Holdings to acquire Bob Evans for $77.00 per share

Post Holdings (POST) and Bob Evans Farms (BOBE) announced that they have entered into a definitive agreement in which Post will acquire Bob Evans for $77.00 per share.

The highly complementary combination will significantly strengthen Post’s portfolio of brands, expand choices for customers and increase Post’s presence in higher growth categories of the packaged food market.

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 combination with Bob Evans will also strengthen Post’s presence in commercial foodservice, create opportunities for future growth and enhance Post’s position as one of North America’s largest packaged food companies.

The transaction, which was approved by the boards of both companies, is expected to be completed in the first calendar quarter of 2018, Post’s Q2 of fiscal year 2018, subject to customary closing conditions including the expiration of waiting periods under U.S. antitrust laws and approval of Bob Evans’ stockholders.

The equity value of the transaction is approximately $1.5 billion.

The acquisition purchase price represents a 15% premium on the 30 day volume weighted average price of Bob Evans shares.

Post expects to finance the purchase with cash on hand and through borrowings under Post’s existing revolving credit facility. Bob Evans will continue its dividend payments in the ordinary course of business pending closing.

Post management expects Bob Evans to contribute approximately $107 million of adjusted EBITDA on an annual basis, which is the midpoint of Bob Evans’ current fiscal year 2018 adjusted EBITDA outlook.

This outlook is before the realization of cost synergies which Post management expects to be approximately $25 annually by the third full fiscal year post-closing, resulting from benefits of scale, shared administrative services and infrastructure optimization.

One-time costs to achieve synergies are estimated to be approximately $25M.

The transaction is expected to be immediately accretive to Post’s top-line growth, Adjusted EBITDA margins and free cash flow, excluding one-time transaction expenses.

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