Breakfast cereal firm Weetabix bought in £1.4bn deal by consumer giant Post
Breakfast cereal company Weetabix has been bought out of Chinese ownership following a £1.4bn swoop by US consumer giant Post Holdings.
The household staple has been sold by the Bright Food Group and an investment fund advised by Baring Private Equity Asia after they struggled to push the brand into China.
Weetabix, which also owns Alpen, Weetos and Ready Brek, employs 1,800 staff and secured revenues of $513m and earnings of $148m for the year to the end of December 2016.
It has three manufacturing operations in the UK and produces all the wheat for its cereals within 50 miles of Burton Latimer, Northamptonshire.
Rob Vitale, the president and chief executive of Post, said the deal would bring exciting growth opportunities for the firm.
He said: "We have long admired Weetabix as a leader in cereal and believe it will be a fantastic strategic fit within Post.
"Combining together two category leaders continues our strategy of strengthening our portfolio in stable categories and diversifying into new markets, bringing much-loved brands to significantly more customers globally."
St Louis-based Post is the third biggest cereal-maker in America, with 8,700 staff and brands such as Pebbles, Malt-O-Meal and Better Oats.
US and Asian businesses have ramped up their interest in buying British firms following the pound's 17% plunge against the US dollar since the Brexit vote.
Bright Food Group, a state-owned firm based in Shanghai, bought a 60pc stake in Weetabix in 2012, with the remaining 40pc being held by Baring Private Equity Asia.
As part of the deal, Post will launch a joint venture with the two Asian sellers to distribute Weetabix products throughout China.
The move will also trigger a top-level shake-up in the UK, with Sally Abbott being promoted to Weetabix managing director from director of marketing, while Weetabix chief executive Giles Turrell will become chairman.
Post, which recorded annual revenues of $5bn to September 30 last year, said the tie-up would bolster earnings by £120m a year.
It will also deliver annual cost savings of around £20m in three years, the firm added.
George Salmon, equity analyst at Hargreaves Lansdown, said it was no surprise Bright Food Group decided to sell the firm after struggling to crack the Chinese market.
He said: "The deal comes hot on the heels of Kraft Heinz's bid for Unilever and 21st Century Fox's approach for Sky and further transatlantic deals may be flushed out by the strong dollar and rising US interest rates.
"It's also unsurprising to see one of the UK's biggest cereal brands remain in foreign ownership, due to the pound's weakness.
"UK-listed Associated British Foods was rumoured to have been interested in a deal, but any domestic buyers would have had to overcome the headwind of the pound's reduced buying power.
"In contrast, the dollar's recent strength has helped the successful bidder, US consumer group Post Holdings."
Weetabix was founded by Bennison Osbourne and Malcolm MacFarlane in 1932 and has its UK headquarters in Kettering.
Jonathan Buxton, head of retail and consumer at Cavendish Corporate Finance, said: "Importantly, the $1.8bn takeover of Weetabix will give Post both a significant UK presence and a greater share of the North American market.
"Post has been highly acquisitive in the past and an acquisition of Weetabix could mark the start of a spending spree on UK assets, making the most of its dollar-denominated spending power.
"While its sales in China doubled in 2016, Weetabix was put up for sale in January this year after the state-backed Chinese Bright Food failed to expand Weetabix in its home market."