Post Holdings Inc POST has reportedly held talks with ConAgra Foods Inc 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.
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.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
date | ticker | name | Price Target | Upside/Downside | Recommendation | Firm |
---|
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.