Market Overview

Citi Weights In On Post, ConAgra Merger Rumors

Share:
Citi Weights In On Post, ConAgra Merger Rumors
Related POST
Cereal Killers: Breakfast Food Makers Retool To Capture Elusive Millennial Market
Jim Cramer Gives His Opinion On Post Holdings And Mattel
Related CAG
Wall Street's M&A Chatter From July 18: Hydro One-Avista, AT&T-JV Otter Media, ConAgra-Pinnacle Foods
5 Biggest Price Target Changes For Friday

Post Holdings Inc (NYSE: POST) has reportedly held talks with ConAgra Foods Inc (NYSE: CAG) regarding merging with its frozen potato business, Lamb Weston. Among the main considerations in evaluating the possible merger is whether ConAgra would spin off or sell Lamb Weston, Citi’s Kevin Ziets said in a report.

Possible Transactions

The three scenarios of how ConAgra would divest Lamb Weston are in an all-cash deal, an all-stock deal or a partial stock deal. Analyst Kevin Ziets considers an all-cash transaction to be the worst case scenario, since it would take pro forma leverage up to ~5.5x.

Related Link: McDonald's Returns To Chicago Searching For Millennials Despite City Troubles

Ziets noted that Post Holdings’ track record of acquisition integration had improved significantly, and the company was able to achieve cost savings and generate free cash flow.

The proposed merger would make Post Holdings “the most significant scale players in HY food, with ~$8bn in sales and $1.7bn in EBITDA,” while the company’s leverage level would not be substantially more than that of other acquisitive names.

If the transaction with ConAgra did not come through, Post Holdings would likely look at alternative investments, including other names in the foodservice industry, such as AdvancePierre, the analyst mentioned.

Ziets reiterated an Overweight rating for Post Holdings.

Latest Ratings for POST

DateFirmActionFromTo
Jul 2017Goldman SachsInitiates Coverage OnNeutralBuy
Sep 2016BMO CapitalDowngradesOutperformMarket Perform
Jun 2016BB&T CapitalUpgradesHoldBuy

View More Analyst Ratings for POST
View the Latest Analyst Ratings

Posted-In: Analyst Color Long Ideas News Rumors Reiteration M&A Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (CAG + POST)

View Comments and Join the Discussion!