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Cereal maker Post Holdings is buying Minnesota-based MOM Brands Co., the maker of venerable Malt-O-Meal cereal and its lineup of value-priced bagged cereals.
The $1.15 billion deal announced Monday will add MOM Brands’ cereals, such as Frosted Mini Spooners, Tootie Fruities and Cinnamon Toasters, to Post’s cereal lineup, which features Grape-Nuts, Alpha-Bits, Honey Bunches of Oats and dozens more.
MOM Brands is based in Lakeville, and the cereal maker has roughly 1,000 employees in Minnesota, or two-thirds of its 1,500 employees nationwide. Its largest plant is in Northfield, where workers manufacture more than 100 varieties of cereal.
The family-owned company is the No. 4 cereal maker in the United States, specializing in bags of bargain-priced knockoffs that mimic heavily advertised Kellogg’s and General Mills favorites.
MOM Brands holds an 8 percent market share in the cereal category. After joining forces with No. 3 Post Foods, the newly combined company will hold an 18 percent market share and be better positioned to take on leaders Kellogg’s and Golden Valley-based General Mills.
Wall Street welcomed the news, sending shares of Post up more than 17 percent.
Post has been on acquisition spree lately to diversify. Last June, it completed a $2.45 billion acquisition of fellow packaged food maker Michael Foods Inc. in Minnetonka.
St. Louis-based Post Holdings Inc. plans to finance most of the MOM Brands deal and sell about $240 million in stock, subject to market conditions. It will pay $1.05 billion in cash and give MOM Brands owners nearly 2.5 million shares of stock for the acquisition, which is expected to be completed in the third quarter.
Linda Fisher, spokeswoman for MOM Brands, said the deal signals the strength of the underlying business, but she couldn’t give much clarity on its impact on the Minnesota operations.
“We just announced the agreement, so it’s really too early to say what this will mean for operations and jobs,” Fisher said. “But what you can see from the Post Holdings announcement is … they have tremendous respect for the company and our brands.”
MOM Brands has 250 employees at its headquarters in Lakeville, another 650 employees at its production facilities in Northfield and 80 or so more at distribution centers in Northfield and Faribault, Fisher said.
She said a transition team representing both Post and MOM Brands will assess the operations and the company’s direction going forward.
For those 1,000 Minnesota workers, Fisher said, “I think what it means most importantly is, being part of Post Holdings, which is a much larger and much more diversified company, creates more opportunities for employees.”
Monday’s deal strengthens Post, as it tries to regain its luster in a category where it has struggled in recent years, as Post changed hands in a series of corporate shuffles.
MOM Brands, by contrast, has a stronger track record of growth.
“In the past 10 years, this company has doubled in size in terms of our sales and growth and market share,” Fisher noted.
The past couple of years, however, have been tough for all cereal makers, including MOM Brands, which had some layoffs in 2013.
“The cereal category is somewhat challenged,” Fisher said. “The category has not grown in the past two or three years, and our friends down the highway in Golden Valley and in Battle Creek have all experienced the consequences of that. But we are starting to see an upturn.”
Kellogg’s is based in Battle Creek, Mich.
MOM Brands is owned by the third- and fourth-generation descendants of John Campbell, who founded the company in 1919. The company for years was known as Malt-O-Meal and changed its name only in 2012 to MOM Brands.
The founder Campbell moved production to Northfield in 1927, to the historic Ames Mill on the Cannon River. That facility remains active and is “where we still make our original hot cereal,” Fisher said.
A much larger and more modern factory is also located in Northfield, which makes every type of cereal MOM Brands produces, Fisher said.
The announcement said that Chris Neugent, MOM Brands’ CEO, will continue to lead the MOM Brands business as president, and will report to Richard Koulouris, who is joining Post Holdings in February and will lead the combined Post Foods and MOM Brands cereal business.
In a statement, Neugent said, “By joining forces with Post, we will have more resources available to innovate, extend our brands and expand distribution. We believe that this new, combined enterprise will be uniquely positioned to help our customers find new solutions in the highly competitive cereal category.”
Beyond its bagged cereals, MOM Brands also has a line of hot cereals including MOM’s Best, Better Oats, and its original Malt-O-Meal.
Shares of Post Holdings rose $7.39 to close at $48.83 on Monday.
Associated Press reports were used in this story. Tom Webb can be reached at 651-228-5428. Follow him at twitter.com/TomWebbMN.
