ST. LOUIS — Post Holdings on May 4 completed its $1.15 billion acquisition of Minnesota-based MOM Brands Co., maker of Malt-O-Meal and other ready-to-eat cereals. With the acquisition of MOM, Post is now the third largest maker of R.-T.-E. cereals with 18% of the market, trailing only General Mills, Inc. and Kellogg Co.
In a May 8 conference call with analysts to discuss second-quarter fiscal 2015 financials, Rob Vitale, president and chief executive officer of Post, said the company’s optimism around MOM is “quite high.”
“Integration planning has gone well, and we continue to believe our synergy estimates are conservative,” Mr. Vitale said. “In fact, we expect to achieve the full $50 million in cost reductions by the end of year two rather than year three. We also continue to believe there is meaningful upside to our $50 million estimate. The MOM combination is not simply about cost reduction, rather it positions Post as a value leader in R.-T.-E. cereal. Once again this quarter, value grew as extra large boxes grew 14.3% in dollars and bags grew 6.3%. We believe Post can grow in the segment of the category once the businesses are combined.”
Asked about Post’s position in the value segment of the R.-T.-E. cereal category, Mr. Vitale said, “We have embraced the strategy of moving to the value segment, certainly as embodied by the acquisition of MOM. The opportunity to look at costs at MOM and the combination between Post and MOM and the resulting scale gives us the ability to use that scale to produce efficiencies that allows us to migrate into that value orientation with the impact of negative mix and still expand margins. So, yes, we will continue to have an overhang of mix as a result of our migration to value, but that will be more than offset by a reduction in cost as we bring the two businesses together.”
He said Post has found no negative surprises since becoming involved with MOM about 90 days ago and in fact has been encouraged that the upside appears more significant than previously thought.
Net income at Post in the second quarter ended March 31 totaled $26.3 million, equal to 48c per share on the common stock, which compared with a loss of $22.6 million in the same period a year ago. Net sales increased 140% to $1,052.7 million from $438 million.
