The deal is the second largest in North America this year, well behind Amazon.com’s $13.7bn takeover of Whole Foods last month, but ahead of Campbell Soup’s $700m purchase of Pacific Foods in July.
The acquisition of Bob Evans will give the maker of Grape-Nuts, Raisin Bran and Honey Bunches of Oats cereals a portion of the breakfast sausage and frozen foods markets.
Amid lessening demand for breakfast cereals – sales are down 9% in the US since 2012, according to Euromonitor – the $57bn company has turned to acquisitions to broaden its offerings.
The latest deal follows Post’s $1.8bn purchase of Weetabix in July, and the $1.15bn acquisition of Malt-O-Meal maker MOM Brands in 2015.
Three in top 10
The St Louis, Missouri, company now owns three of the world’s top 10 cereal brands, said Euromonitor.
Post has agreed to pay $77 a share for Bob Evans, a 5.6% premium to the company’s Monday closing price of $72.93. Bob Evans shares jumped 6% at the opening of trade on Tuesday.
Bob Evans, founded in 1948, sells frozen products like refrigerated potato, pasta and convenience food items under the Bob Evans, Owens, Country Creek and Pineland Farms brands.
In January, it sold its restaurant division to private-equity giant Golden Gate Capital for $565m.
Sausage with your egg?
Post plans to incorporate Bob Evans into its egg, potato and cheese business, to be led by Bob Evans’ president and CEO Mike Townsley.
The deal has been approved by the boards of both companies and is expected to close by the end of Post’s second quarter in 2018. Bob Evans’ shareholders must still sign off on the deal.
“Combining with Bob Evans expands our portfolio of top brands and gives Post a leading position in the perimeter of the store,” said Post’s ambitious CEO Rob Vitale.
Vitale’s gamble on packaged goods comes as consumers move away from processed food towards fresh produce, which they perceive as healthier.