Lakeville-based Post Consumer Brands will soon be selling pet food after its parent company struck a $1.2 billion deal to buy several brands from J.M. Smucker.
Post buys Kibbles 'n Bits, Rachael Ray's and other pet food brands for $1.2 billion
Nutrish, 9Lives and other pet brands will be folded into Lakeville-based Post Consumer Brands.
February 9, 2023 at 5:48PM
Rachael Ray Nutrish, Kibbles 'n Bits, 9Lives, Nature's Recipe and other brands will join the cereal-maker's roster when the deal closes this spring.
Combined, the brands generated $1.4 billion in the 12 months ended April 30 last year, according to a news release.
Post Holdings, which is based in St. Louis and has about $5.6 billion in annual revenue, announced the deal Wednesday. The company said the acquisition is "a compelling entry point into the attractive and growing pet food category" and hinted more pet food acquisitions could be in the works.
Pet food has been a hot category, now worth more than $50 billion in the U.S., thanks in part to the millions of new pets adopted by Americans during the pandemic. The trend toward "humanization" in pet food — treating cats and dogs as family members — has also created a willingness to spend more on pets.
General Mills bought Blue Buffalo for $8 billion in 2018. It added Tyson pet treats for another $1.2 billion in 2021. As a result, the segment has been a major source of growth for the Golden Valley-based food company.
Post's acquisition comes with manufacturing and distribution facilities in Pennsylvania and Kansas and more than 1,000 employees. The company expects EBITDA — earnings before interest, taxes, depreciation and amortization — of $100 million in its first year of pet food sales and said it will be a big cash generator.
"As Post enters the pet category, we believe this should modestly enhance the growth profile of its business while providing a platform for future acquisitions," analysts at Stifel wrote in a note published Wednesday, adding the manufacturing plants are a major draw as pet food capacity remains limited for other brands. "These brands are likely to grow in the low single digits going forward as we get past this heavy pricing phase."
But during a conference call Wednesday, Jason English at Goldman Sachs said "these brands haven't really grown; they've actually been shrinking for many years."
Post CEO Rob Vitale said the purchase will pencil out even without more marketing to drive growth. "It doesn't need to grow to be an attractive outcome," he said.
The company's stock price slid 4% Thursday to close at $89.74.
The brands will be managed as a new category inside Post Consumer Brands, which will continue to be led in Minnesota by CEO Nicolas Catoggio.
Post is the nation's third-largest cereal producer, after General Mills and Kellogg, and is known for Honey Bunches of Oats, Fruity Pebbles and Grape Nuts. The consumer brands division also owns Peter Pan peanut butter.
President and Chief Creative Officer Joe Cecere of Little & Company worked with the brewery to relaunch the West Coast brand, including its hallmark IPA.
