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Post eyes perimeter growth in Bob Evans deal

Sausage is fine, but sides “terrific,” CEO says

Side dishes are the main course of Post Holdings’ $1.5 billion acquisition of Bob Evans, officials said.

St Louis-based Post announced the deal on Tuesday, citing Bob Evans’ market leadership and strong growth in the refrigerated side dish business, which is benefitting from trends toward perimeter shopping and convenience. The deal also brings the U.S.’s No. 3 ready-to-eat cereal maker an alternative breakfast choice in leading sausage brands, but Post CEO Robert Vitale made it clear that “heat-and-eat” products like mac and cheese, potatoes and pastas drove interest in the deal—Post’s third acquisition in the last year.

“The emphasis on this transaction is to participate in the refrigerated side business less than the sausage business,” he told analysts in a conference call. “We think the sausage business is a fine business to own, but we think the refrigerated side business is a really terrific category to participate and lead in.”

Evans’ refrigerated side dish business has posted a compound annual growth rate of 14% over the last five years as consumers have increasingly sought easy-to-prepare meals. Vitale said Post sees opportunities for further organic growth as well as opportunities to expand distribution and innovation in the space, with expectations that the category and Bob Evans could see high single-digit growth.

For New Albany, Ohio-based Bob Evans, the Post sale — which is expected to be completed early next year — closes out an eventful year during which the company also sold its restaurant business and acquired Pineland Farms Potato Co., a potato processor, as part of a shift to concentrate on its profitable retail foods business. Those deals were announced in January.

As part of the transition to Post, Bob Evans’ current president and CEO, Mike Townsley, will lead a refrigerated foods business unit that will include Post’s existing retail egg, potato and cheese business. Jim Dwyer will continue in his current role as president and CEO of Post’s Michael Foods Group, managing the commercial foodservice egg, potato and pasta businesses, which will include the Bob Evans foodservice business.

Post earlier this year acquired Weetabix Ltd., the largest ready-to-eat cereal company in the United Kingdom, for about $1.7 billion, as well as egg producer National Pasteurized Eggs Inc.

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