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Shares of Post Holdings (NYSE:POST) jumped more than 17% Monday after the food giant announced select preliminary fiscal first-quarter 2015 results and another large acquisition.
Why it's happening
First, quarterly net sales are now expected to be approximately $1.074 billion, which should lead to adjusted earnings before interest, taxes, depreciation, and amortization of $126 million to $128 million. And while revenue is roughly in line with analysts' expectations, Post previously told investors to expect adjusted EBITDA between $115 million and $120 million.
In addition, Post announced it has agreed to acquire privately owned MOM Brands for $1.15 billion on a cash-free, debt-free basis. That will include $1.05 billion in cash, and the issuance of 2.45 million shares of Post common stock. MOM Brands (or Malt-o-Meal Brands) has a broad product portfolio that targets the value segment in branded ready-to-eat cereal, private label, and hot wheat and oatmeal. According to Post's PR, adding MOM Brands to its repertoire will "solidify Post's position as the third-largest provider of RTE cereal with a combined dollar share of approximately 18%."
For the fiscal year ended Dec. 27, 2014, Post estimates MOM Brands achieved adjusted EBITDA of between $119 million and $121 million. And after one-time costs of between $70 million and $80 million, the acquisition should create around $50 million in run-rate cost synergies by the third full fiscal year following its close. Post will also enjoy a tax benefit with a net present value of roughly $200 million.
"For Post, this is the right move, at the right price, in the right category," added Post CEO Rob Vitale. "After a century of spirited rivalry between MOM Brands and Post, we now look forward to combining our strengths."