US food group Post Holdings appears to have moved into pole position in the £1.5bn auction for UK cereal group Weetabix.
Post, the number three cereal maker in the US with brands including Honey Bunches Oats, Grape Nuts and Cocoa Pebbles, is understood to be leading the race to buy the Bright Food Group-owned breakfast cereal manufacturer, according to a number of market sources.
The Grocer understands that bid interest has ended from other previously active suitors, notably Nestlé and General Mills joint venture Cereal Partners Worldwide and Italian pasta group Barilla.
Kellogg’s retains a watching interest in the process, though it is not thought a likely destination for Weetabix given the potential regulatory difficulties.
However, one source noted: “Kellogg’s will be very interested in a strong, better health-positioned brand in the UK. Big branded food deals are less threatening for regulators than in years past, so it just might get through.”
Other names previously linked include Associated British Foods, PepsiCo and Pladis.
China’s Bright Food values Weetabix, which has built a significant North American business, at around £1.5bn.
One City dealmaker said such a sum could prove “hard to deliver” for Goldman Sachs, which is running the auction process.
Bright’s preference is to sell to a trade buyer, but one source suggested private equity players may yet be invited into the process if Post or another trade buyer are unable to agree terms.
Bright Food Group bought its 60% stake in Weetabix from private equity group Lion Capital in 2012, with Lion’s remaining stake being sold to Hong Kong-based Baring Private Equity Asia in September 2015. The Weetabix sales process also includes Baring’s stake.
Weetabix’s most recent annual accounts showed global sales fell back last year as it battled its “most difficult [trading] period for a generation”.
Globally, Weetabix’s sales, including joint ventures and its North American business, slipped 1.3% to £432.8m in the year to 2 January 2016. In its UK business sales fell 2.4% to £350.8m.
Despite a lack of headline sales growth in the UK, Weetabix has increased its market share for cereals and drinks from 15.3% to 16.4% in the past year. It will open a further production capabilities in Burton Latimer and Corby in 2018 to further boost growth plans already aided by the launches of Weetabix Protein, responsible for £7m of sales in 2016, and Weetabix On the Go, which recently sold its 18 millionth bottle.