Zacks Investment Research upgraded
Post Holding Inc
) to a Zacks Rank #1 (Strong Buy) on Jan 17, driven by
back-to-back acquisitions announced in the recent past.
Why the Upgrade?
On Jan 2, this cereal maker completed the acquisition of
private label pasta manufacturer Dakota Growers Pasta Company,
Inc. for $370 million. The company has plans to create a unit,
combining Dakota Growers and Golden Boy Foods Ltd., whose
acquisition was announced in Dec 2013.
Golden Boy is a North American manufacturer of private label
peanut and other nut butters, as well as dried fruit, baking and
snacking nuts. Golden Boy is a key supplier to the U.S. and
Canadian retail and foodservice channels. Post Holdings has
agreed to pay Canadian $320 million for Golden Boy on a
cash-free, debt-free basis and the transaction is expected to be
complete in Feb 2014.
The company believes that the combination of Dakota Growers
and Golden Boy will bear fruits as it will beef up the company's
private label products of both Dakota Growers and Golden Boy as
well as expand the active nutrition categories of the company.
The combined unit will have annual net sales in excess of $500
In Dec 2013, Post Holdings also agreed to buy privately owned
Dymatize for $380 million, along with the announcement of Golden
Boy acquisition. The Dymatize deal is also expected to close in
Feb 2014 and includes a contingent payment of up to $17.5
Dymatize manufactures and markets premium protein powders,
bars and nutritional supplements under the Dymatize and Supreme
Protein brands. The acquisition of Dymatize comes three months
after Post Holdings bought the branded food and beverage business
of Premier Nutrition Corp., a maker of products like vanilla
Post Holdings believes that adding Dymatize to its business
would enable it to serve a different set of customers compared to
the former Premier Nutrition Corp. assets. Dymatize supplies
speciality U.S. stores, plus food, drug and mass merchandise
outlets. Premier sells into club stores, as well as the food,
drug and mass channels.
The company has been concentrating on active nutrition and
private label since the last one year in order to transform the
company from a low-growth, single-category participant to a more
diversified consumer products enterprise, with a better product
portfolio and stronger participation in retail channels and
categories. The acquisition of Attune Foods (in Jan 2013) and the
Hearthside's Golden Temple granola business (May 2013) provided
entry into the natural specialty channels, where natural and
organic cereals are experiencing high single-digit growth.
This food company witnessed sharp upward estimate revisions
after announcing the completion of acquisition. Most of the
estimates for fiscal 2014 and fiscal 2015 increased over the past
Other Stocks to Consider
Other stocks in the consumer staples sector worth considering
Pinnacle Foods Inc.
ConAgra Foods Inc.
Green Mountain Coffee Roasters Inc
), all of them holding a Zacks Rank #2 (Buy).
CONAGRA FOODS (CAG): Free Stock Analysis
GREEN MTN COFFE (GMCR): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis
POST HOLDINGS (POST): Free Stock Analysis
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