Post Holdings Inc. agreed to acquire Michael Foods Group Inc., the processing and distribution company controlled by Goldman Sachs Group Inc.’s private-equity arm, for $2.45 billion to strengthen its position in protein-based foods.

Post obtained commitments from lenders to provide as much as $1.765 billion in credit facilities, including a bridge loan of as much as $340 million, it said in a statement today. The financing and cash on hand will pay for the purchase.

The deal will expand Post’s clout with retailers, broaden its distribution and give it products such as Papetti’s Easy Eggs, Simply Potatoes and Crystal Farms cheese. Michael transforms the cereal company into a more formidable player in protein, which is fast becoming a centerpiece of the healthy- eating trends that packaged-food makers are chasing.

The addition of Michael “creates a diversified food company with substantial cash-flow generation enabling it to reduce leverage and fund growth over the long term,” St. Louis- based Post said.


Equity Sale

Post plans to replace part of the committed financing by selling about $500 million of additional equity or equity-linked capital. The company estimates Michael’s adjusted earnings before interest, taxes, depreciation and amortization will be $255 million to $270 million this calendar year, and expects the transaction to be completed this quarter.

Michael has annual net sales of more than $1.5 billion, according to the Minnetonka, Minnesota-based company’s website.

Post will also pay $50 million on the first anniversary of the closing date, related to tax benefits.

The deal will add to earnings per share, excluding one-time transaction expenses, and Michael’s management team will continue to lead the business, Post said. The company predicted savings of about $10 million from increased scale.

Goldman Sachs invested about $360 million of equity in a $1.7 billion leveraged buyout of Michael from Thomas H. Lee Partners LP in 2010, according to regulatory filings. Goldman Sachs has collected about $327 million in dividends from Michael Foods. Thomas H. Lee retained a 21 percent stake in Michael after the sale to Goldman Sachs.

Post Chairman and Chief Executive Officer William Stiritz has been buying products such as Premier Nutrition supplements and Hearthside Food Solutions’ organic cereals and snacks since Post was spun off from Ralcorp Inc. in 2012. The global active- nutrition category may grow at a compound annual rate of 7 percent from 2014 to 2017, Post has said.

In February, Post agreed to buy the PowerBar and Musashi sports-nutrition brands from Nestle SA to take advantage of increasing demand for health- and fitness-related snacks.

Barclays is financial adviser to Post on the Michael Foods deal, while Bank of America Corp. and Goldman Sachs are advising Michael.

Fried Frank is handling legal matters for Michael. Attorneys on the deal include corporate partners Abigail Bomba and Robert Schwenkel.

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