Post Holdings, Inc. (NYSE:POST), a consumer packaged goods holding
company, today announced it has agreed to acquire Weetabix Limited
(“Weetabix”) from Shanghai based state owned enterprise Bright Food
Group and an investment fund advised by Baring Private Equity Asia.
Weetabix is a leading United Kingdom (“UK”) based
packaged food company that primarily produces ready-to-eat (“RTE”)
cereal products spanning branded and private label. Founded in
1932, Weetabix holds the number two overall position in the UK RTE
cereal category. Its portfolio includes the iconic Weetabix brand,
which holds the number one brand position in the UK RTE cereal
category, as well as Alpen (the number one muesli brand in the UK),
Barbara’s, Weetos and Ready Brek.
In North America, Weetabix operates a leading
natural and organic RTE cereal and snacking platform in both
branded and private label, led by the Barbara’s brand and the
Puffins sub-brand and serving leading natural and specialty channel
and conventional retailers.
Additionally, Weetabix has an established and extensive
international presence, with operations in Africa through two joint
ventures and a distribution export business to over 90 countries.
Post has agreed in principle to establish a joint venture with
Bright Food Group and an investment fund advised by Baring Private
Equity Asia to manage the Weetabix China operations.
“We have long admired Weetabix as a leader in cereal and believe
it will be a fantastic strategic fit within Post,” said Rob Vitale,
Post’s President and CEO. “Combining together two category leaders
continues our strategy of strengthening our portfolio in stable
categories and diversifying into new markets, bringing much-loved
brands to significantly more customers globally. We are
excited about the growth opportunities that this acquisition
brings.”
The combination of Post and Weetabix creates a diversified
international food company with substantial free cash flow
generation, enabling Post to fund growth over the long-term,
including international cross-selling opportunities through
expansion of Post products in select international markets and
further expansion of Weetabix and Barbara’s in North America.
At the closing of the transaction, Sally Abbott, Weetabix’s
Director of Marketing, will become Managing Director of Weetabix UK
and Ireland and report to Rob Vitale. Giles Turrell, Weetabix’s
current CEO, will assume the newly created role of Chairman of
Weetabix with responsibility for overseeing the integration of
Weetabix into the Post portfolio. The other members of Weetabix’s
existing management team will continue to lead the
organization.
The transaction is expected to be completed in the third
calendar quarter (Post’s fiscal fourth quarter), subject to the
satisfaction of limited closing conditions, including the
expiration of waiting periods under U.S. antitrust laws.
Financial Details
Post will acquire Weetabix for £1.4 billion on a cash free, debt
free basis, subject to certain adjustments as described in the
purchase agreement. Post expects to fund the acquisition with a
combination of cash on hand and through borrowings under its
existing revolving credit facility and/or, subject to market
conditions, a new senior secured term loan facility.
Post management expects Weetabix to contribute approximately
£120 million of adjusted EBITDA on an annual basis before the
realization of cost synergies which Post management expects to be
approximately £20 million annually by the third full fiscal year
post-closing, resulting from benefits of scale, shared
administrative services and infrastructure optimization and
rationalization. The transaction is expected to be immediately
accretive to Post’s Adjusted EBITDA margins and free cash flow,
excluding one-time transaction expenses.
For additional information regarding non-GAAP measures, such as
adjusted EBITDA, see the related explanations presented under “Use
of Non-GAAP Measure” and “Explanation and Reconciliation of
Non-GAAP Measure” later in this release.
Preliminary Unaudited Selected Financial Data for the
Second Quarter of Fiscal 2017
Post has provided the following preliminary unaudited selected
financial data for the second quarter of fiscal 2017 ended March
31, 2017, which should be read in conjunction with the financial
statements and management’s discussion and analysis included in
Post’s filings with the Securities and Exchange Commission (“SEC”),
as well as the matters discussed under “Risk Factors” in Post’s
Form 10-K for the fiscal year ended September 30, 2016 and Form
10-Q for the fiscal quarter ended December 31, 2016:
- Net sales of approximately $1.25 billion;
- Net loss of approximately $4 million; and
- Adjusted EBITDA of approximately $228 million.
The preliminary financial data discussed above consist of
estimates derived from Post’s internal books and records and have
been prepared by, and are the responsibility of, Post’s management,
are based upon information available to management as of the date
hereof, and have not been prepared with a view toward compliance
with published guidelines of the SEC or the guidelines of the
American Institute of Certified Public Accountants for the
preparation or presentation of financial information. The
preliminary estimates discussed above are subject to the completion
of financial closing procedures, final adjustments and other
developments that may arise between now and the time the financial
results for the second quarter are finalized. Therefore, actual
results may differ materially from these estimates and all of these
preliminary estimates are subject to change. In addition,
preliminary results for the second quarter are not necessarily
indicative of operating results for any future period or results
for the full year.
Adjusted EBITDA is a non-GAAP measure. For additional
information regarding non-GAAP measures, see the related
explanations presented under “Use of Non-GAAP Measure” and
“Explanation and Reconciliation of Non-GAAP Measure” later in this
release.
Outlook
Post management has affirmed its fiscal 2017 Adjusted EBITDA
guidance range of $920-$950 million, excluding any contribution
from Weetabix.
Post provides Adjusted EBITDA guidance and discloses its
expectations as to the effect of the Weetabix transaction on Post’s
Adjusted EBITDA, including the expected annual contribution of
Weetabix, and free cash flow only on a non-GAAP basis and does not
provide a reconciliation of its forward-looking non-GAAP guidance
measures to the mostly directly comparable GAAP measures due to the
inherent difficulty in forecasting and quantifying certain amounts
that are necessary for such reconciliations, including adjustments
that could be made for non-cash mark-to-market adjustments and cash
settlements on interest rate swaps, provision for legal settlement,
transaction and integration costs, restructuring and plant closure
costs, losses on assets held for sale, mark-to-market adjustments
on commodity hedges and other charges reflected in the Company’s
reconciliation of historic numbers, the amounts of which, based on
historical experience, could be significant. For additional
information regarding Post’s non-GAAP measures, see the related
explanations presented under “Use of Non-GAAP Measure” later in
this release.
Additional Information
Barclays, Rabobank, Credit Suisse and Nomura are acting as
financial advisors to Post.
Use of Non-GAAP Measure
Post uses Adjusted EBITDA and free cash flow, both of which are
non-GAAP measures, in this release to supplement the financial
measures prepared in accordance with U.S. generally accepted
accounting principles (GAAP). Adjusted EBITDA is not prepared in
accordance with U.S. GAAP, as it excludes certain items as listed
later in this release, and may not be comparable to
similarly-titled measures of other companies.
Post Management uses certain non-GAAP measures, including
Adjusted EBITDA and free cash flow, as key metrics in the
evaluation of underlying Company and segment performance, in making
financial, operating and planning decisions, and, in part, in the
determination of cash bonuses for its executive officers and
employees. Management believes the use of non-GAAP measures,
including Adjusted EBITDA and free cash flow, provides increased
transparency and assists investors in understanding the underlying
operating performance of the Company and its segments and in the
analysis of ongoing operating trends.
The reconciliation of Post’s Adjusted EBITDA to the most
directly comparable GAAP measure is provided at the end of this
release under “Explanation and Reconciliation of Non-GAAP Measure.”
Because Post discusses free cash flow in this release only in
relation to management’s expectations of the future effect of the
Weetabix transaction on this non-GAAP measure, Post has not, for
the reasons discussed above, provided a reconciliation of its
forward-looking free cash flow expectations to the mostly directly
comparable GAAP measures.
Prospective Financial Information
Prospective financial information is necessarily speculative in
nature, and it can be expected that some or all of the assumptions
underlying the prospective financial information described above
will not materialize or will vary significantly from actual
results. For further discussion of some of the factors that may
cause actual results to vary materially from the information
provided above see “Forward-Looking Statements” below. Accordingly,
the prospective financial information provided above is only an
estimate of what Post management believes is realizable as of the
date of this press release. It should also be recognized that the
reliability of any forecasted financial data diminishes the farther
in the future that the data is forecast. In light of the foregoing,
the information should be viewed in context and undue reliance
should not be placed upon it.
Conference Call to Discuss Acquisition
The Company will host a conference call on Tuesday, April 18,
2017 at 8:00 a.m. EDT (1:00 p.m. BST) in which Robert V. Vitale,
President and Chief Executive Officer will discuss the acquisition
and respond to questions.
Interested parties may join the conference call by dialing (877)
540-0891 in the United States and (678) 408-4007 from outside of
the United States. The conference identification number is 9376515.
Interested parties are invited to listen to the webcast of the
conference call, which can be accessed by visiting the Investor
Relations section of the Company’s website at
www.postholdings.com.
A replay of the conference call will be available through
Tuesday, April 25, 2017 by dialing (800) 585-8367 in the United
States and (404) 537-3406 from outside of the United States and
using the conference identification number 9376515. A webcast
replay will also be available for a limited period on the Company’s
website in the Investor Relations section.
Forward-Looking Statements
Certain matters discussed in this press release are
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements are based on the current expectations of Post and are
subject to uncertainty and changes in circumstances. These
forward-looking statements include, among others, statements
regarding Post’s fiscal 2017 Adjusted EBITDA guidance range,
expected synergies and benefits of the acquisition, expected
sources of financing, expectations about future business plans,
prospective performance and opportunities, regulatory approvals and
the expected timing of the completion of the
transaction. These forward-looking statements may be
identified by the use of words such as “expect,” “anticipate,”
“believe,” “estimate,” “potential,” “should” or similar words.
There is no assurance that the acquisition of Weetabix will be
consummated, and there are a number of risks and uncertainties that
could cause actual results to differ materially from the
forward-looking statements made herein. These risks and
uncertainties include the following:
- the timing to consummate the acquisition of Weetabix;
- the ability and timing to obtain required regulatory approvals
and satisfy other closing conditions;
- our ability to promptly and effectively integrate the Weetabix
business and obtain expected cost savings and synergies within the
expected timeframe;
- operating costs, customer loss and business disruption
(including, without limitation, difficulties in maintaining
relationships with Weetabix employees, customers or suppliers) that
may be greater than expected following the consummation of the
acquisition of Weetabix;
- our ability to retain certain key employees at Weetabix;
- our ability to borrow funds under a new senior secured term
loan facility on terms acceptable to us or at all;
- the risks associated with the disruption of management’s
attention from ongoing business operations due to this
transaction;
- our ability to continue to compete in our product markets and
our ability to retain our market position;
- our ability to anticipate and respond to changes in consumer
preferences and trends;
- our ability to identify and complete acquisitions and manage
our growth;
- changes in our cost structure, management, financing and
business operations;
- our ability to integrate acquired businesses and whether
acquired businesses will perform as expected;
- changes in economic conditions and consumer demand for our
products;
- significant volatility in the costs of certain raw materials,
commodities, packaging or energy used to manufacture our
products;
- impairment in the carrying value of goodwill or other
intangibles;
- our ability to successfully implement business strategies to
reduce costs;
- our ability to comply with increased regulatory scrutiny
related to certain of our products and/or international sales;
- allegations that our products cause injury or illness, product
recalls and product liability claims and other litigation;
- legal and regulatory factors, including environmental laws,
advertising and labeling laws, changes in food safety and laws and
regulations governing animal feeding and housing operations;
- our ability to maintain competitive pricing, introduce new
products and successfully manage our costs;
- the ultimate impact litigation may have on us;
- the ultimate outcome of the remaining portions of the Michael
Foods egg antitrust litigation, including formal court approval of
the announced settlement with the direct purchaser plaintiffs;
- the loss or bankruptcy of a significant customer;
- consolidations in the retail grocery and foodservice
industries;
- the ability of our private label products to compete with
nationally branded products;
- disruptions or inefficiencies in supply chain;
- our reliance on third party manufacturers for certain of our
products;
- disruptions in the U.S. and global capital and credit
markets;
- fluctuations in foreign currency exchange rates;
- changes in estimates in critical accounting judgments and
changes to or new laws and regulations affecting our business;
- loss of key employees;
- changes in weather conditions, natural disasters, disease
outbreaks and other events beyond our control;
- labor strikes, work stoppages or unionization efforts;
- losses or increased funding and expenses related to our
qualified pension and other post-retirement plans;
- business disruptions caused by information technology failures
and/or technology hacking;
- our ability to protect our intellectual property;
- media campaigns and improper use of social media that damage
our brands;
- our ability to successfully operate our international
operations in compliance with applicable laws and regulations;
- significant differences in our actual operating results from
our guidance regarding our future performance;
- our ability to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, including with respect to acquired
businesses;
- our high leverage and substantial debt, including covenants
that restrict the operation of our business;
- our ability to service our outstanding debt or obtain
additional financing, including both secured and unsecured debt;
and
- other risks and uncertainties described in the Company’s
filings with the Securities and Exchange Commission.
These forward-looking statements represent the Company’s
judgment as of the date of this release. Investors are cautioned
not to place undue reliance on these forward-looking statements.
The Company disclaims, however, any intent or obligation to update
these forward-looking statements.
About Post Holdings, Inc.
Post Holdings, Inc., headquartered in St. Louis, Missouri, is a
consumer packaged goods holding company operating in the
center-of-the-store, foodservice, food ingredient, private label,
refrigerated and active nutrition food categories. Through its Post
Consumer Brands business, Post is a leader in the ready-to-eat
cereal category and offers a broad portfolio that includes
recognized brands such as Honey Bunches of Oats®, Pebbles™, Great
Grains®, Grape-Nuts®, Honeycomb®, Frosted Mini Spooners®, Golden
Puffs®, Cinnamon Toasters®, Fruity Dyno-Bites®, Cocoa Dyno-Bites®,
Berry Colossal Crunch® and Malt-O-Meal® hot wheat cereal. Post’s
Michael Foods Group supplies value-added egg products, refrigerated
potato products, cheese and other dairy case products and dry pasta
products to the foodservice, food ingredient and private label
retail channels and markets retail brands including All Whites®,
Better’n Eggs®, Simply Potatoes® and Crystal Farms®. Post’s Active
Nutrition platform aids consumers in adopting healthier lifestyles
through brands such as PowerBar®, Premier Protein® and Dymatize®.
Post’s Private Brands Group manufactures private label peanut
butter and other nut butters, dried fruits, baking and snacking
nuts, cereal and granola. For more information, visit
www.postholdings.com.
EXPLANATION AND RECONCILIATION OF
NON-GAAP MEASURE
Post uses Adjusted EBITDA, a non-GAAP measure, in this release
to supplement the financial measures prepared in accordance with
U.S. generally accepted accounting principles (GAAP). Adjusted
EBITDA is not prepared in accordance with U.S. GAAP, as it excludes
certain items as listed below, and may not be comparable to
similarly-titled measures of other companies.
Post believes that Adjusted EBITDA is useful to investors in
evaluating the Company’s operating performance and liquidity
because (i) we believe it is widely used to measure a company’s
operating performance without regard to items such as depreciation
and amortization, which can vary depending upon accounting methods
and the book value of assets, (ii) it presents a measure of
corporate performance exclusive of the Company’s capital structure
and the method by which the assets were acquired, and (iii) it is a
financial indicator of a company’s ability to service its debt, as
the Company is required to comply with certain covenants and
limitations that are based on variations of EBITDA in the Company’s
financing documents.
Preliminary Adjusted EBITDA for Post for the quarter ended March
31, 2017 reflects adjustments for net interest expense, income
taxes, depreciation and amortization, as well as the following
adjustments:
a. Loss on extinguishment of debt: The Company has
excluded losses recorded on extinguishment of debt as such losses
are inconsistent in amount and frequency. Additionally, the Company
believes that these costs do not reflect expected ongoing future
operating expenses and do not contribute to a meaningful evaluation
of the Company’s current operating performance or comparisons of
the Company’s operating performance to other periods.
b. Non-cash mark-to-market adjustments and cash
settlements on interest rate swaps: The Company has excluded the
impact of non-cash mark-to-market adjustments and cash settlements
on interest rate swaps due to the inherent uncertainty and
volatility associated with such amounts based on changes in
assumptions with respect to estimates of fair value and economic
conditions and the amount and frequency of such adjustments and
settlements are not consistent.
c. Non-cash stock-based compensation: The Company’s
compensation strategy includes the use of stock-based compensation
to attract and retain executives and employees by aligning their
long-term compensation interests with shareholders’ investment
interests. The Company has excluded non-cash stock-based
compensation as non-cash stock-based compensation can vary
significantly based on reasons such as the timing, size and nature
of the awards granted and subjective assumptions which are
unrelated to operational decisions and performance in any
particular period and do not contribute to meaningful comparisons
of the Company’s operating performance to other periods.
d. Transaction costs and integration costs: The Company
has excluded transaction costs related to professional service fees
and other related costs associated with signed and closed business
combinations and divestitures and integration costs incurred to
integrate acquired or to-be-acquired businesses as the Company
believes that these exclusions allow for more meaningful evaluation
of the Company’s current operating performance and comparisons of
the Company’s operating performance to other periods. The Company
believes such costs are generally not relevant to assessing or
estimating the long-term performance of acquired assets as part of
the Company or the performance of the divested assets, and are not
factored into management’s evaluation of potential acquisitions or
its performance after completion of an acquisition or the
evaluation to divest an asset. In addition, the frequency and
amount of such charges varies significantly based on the size and
timing of the acquisitions and divestitures and the maturities of
the businesses being acquired or divested. Also, the size,
complexity and/or volume of past acquisitions and divestitures,
which often drive the magnitude of such expenses, may not be
indicative of the size, complexity and/or volume of future
acquisitions or divestitures. By excluding these expenses,
management is better able to evaluate the Company’s ability to
utilize its existing assets and estimate the long-term value that
acquired assets will generate for the Company. Furthermore, the
Company believes that the adjustments of these items more closely
correlate with the sustainability of the Company’s operating
performance.
e. Provision for legal settlement: The Company has
excluded gains and losses recorded to recognize a receivable or
liability associated with an anticipated resolution of certain
ongoing litigation as the Company believes such gains and losses do
not reflect expected ongoing future operating expenses and do not
contribute to a meaningful evaluation of the Company’s current
operating performance or comparisons of the Company’s operating
performance to other periods.
f. Mark-to-market adjustments on commodity hedges: The
Company has excluded the impact of mark-to-market adjustments on
commodity hedges due to the inherent uncertainty and volatility
associated with such amounts based on changes in assumptions with
respect to fair value estimates. Additionally, these adjustments
are primarily non-cash items and the amount and frequency of such
adjustments are not consistent.
|
RECONCILIATION OF POST PRELIMINARY NET LOSS TO
PRELIMINARY ADJUSTED EBITDA (Unaudited) |
(in millions) |
|
|
Three Months Ended March 31, |
|
2017 |
Preliminary Net
Loss |
$ |
(4 |
) |
Income tax expense |
— |
|
Interest expense,
net |
80 |
|
Loss on extinguishment
of debt |
62 |
|
Non-cash mark-to-market
adjustments and cash settlements on interest rate swaps |
(1 |
) |
Depreciation and
amortization |
78 |
|
Non-cash stock-based
compensation |
6 |
|
Integration costs |
4 |
|
Transaction costs |
3 |
|
Provision for legal
settlement |
(1 |
) |
Mark-to-market
adjustments on commodity hedges |
1 |
|
Preliminary
Adjusted EBITDA |
$ |
228 |
|
Contact:
Investor Relations
Brad Harper / brad.harper@postholdings.com / (314) 644-7626
UK Media
Finsbury: Dorothy Burwell +44 7733 294 930 / James Thompson +44 7879 810 327 / post@finsbury.com
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