Post Holdings to Acquire Michael Foods for $2.45 billion

Post Holdings, Inc. (NYSE:POST), a consumer packaged goods holding company, has announced it has agreed to acquire MFI Holding Corporation ("Michael Foods") from affiliates of GS Capital Partners, affiliates of Thomas H. Lee Partners and other owners.

Michael Foods is a leading producer of value-added food products and service solutions to customers across the foodservice, retail and food ingredient channels. It holds leading market positions in attractive categories including value-added egg products, refrigerated potato products and cheese and other dairy case products. Michael Foods has well-known brands such as Papetti's®, All Whites®, Better 'n Eggs®, Easy Eggs®, Simply Potatoes® and Crystal Farms®.

The Michael Foods acquisition will be Post's largest transaction to date. It continues Post's strategy of investing in large secular themes in the food industry. Post remains focused on diversifying its business to capitalize on shifts in consumer behavior towards increased consumption of protein and away-from-home breakfast occasions.

The addition of Michael Foods will increase Post's long-term revenue, EBITDA and earnings per share growth potential. The combination of Post and Michael Foods creates a diversified food company with substantial cash flow generation enabling it to reduce leverage and fund growth over the long-term. The transaction is expected to be accretive to Post's earnings per share prior to giving effect to purchase accounting adjustments and one-time transaction expenses. Post management expects to recognize approximately $10 million in synergies resulting from benefits of scale.

Michael Foods will continue to be managed by its existing executive team. Jim Dwyer, Michael Foods' CEO said, "The entire Michael Foods team is excited to join Post Holdings. We believe our business will benefit from Post's portfolio management approach of effectively and efficiently investing in profitable growth and margin expansion. I'm delighted to be joining the Post team."

Bill Stiritz, Post's Chairman and Chief Executive Officer, said "This acquisition is exactly what we look for in an investment. We are extremely impressed with the job Jim and his team have done and we look forward to continuing to build this substantial business with them."

Under the terms of the agreement, Post will acquire Michael Foods for $2.45 billion on a cash-free, debt-free basis, subject to working capital and other adjustments. In addition, Post will make a payment of $50 million on the first anniversary of the closing date, which payment is intended to represent the parties' estimate of the value of certain tax benefits that Michael Foods is expected to realize from payments to be made by or on its behalf in connection with the acquisition.

Concurrent with the signing of the agreement, Post obtained financing commitments under which various lenders have committed to provide up to $1.765 billion in credit facilities, including a committed bridge loan of up to $340 million. Committed facilities, together with cash on hand, are sufficient to fund the purchase price. Post intends to replace a portion of the committed financing with the sale of approximately $500 million of additional equity or equity linked capital, subject to capital and other market conditions. Post also intends to amend its existing revolving credit facility. Post expects to fund its pending acquisition of the PowerBar and Musashi brands with cash on hand or a draw under the amended revolving credit facility.

Michael Foods has grown significantly in recent years. Since 2008, adjusted EBITDA has grown at a compound annual growth rate of 5.3%. In a separate release dated April 16, 2014, Michael Foods management announced that it expects adjusted EBITDA for the quarter ended March 29, 2014 to be approximately $48 million, subject to quarterly review procedures. Post management estimates adjusted EBITDA for Michael Foods for calendar 2014 to be between $255 and $270 million.

The transaction is expected to be completed in the second calendar quarter of 2014, Post's fiscal third quarter, subject to various closing conditions including the expiration of waiting periods required under antitrust laws.

Barclays is acting as exclusive financial advisor to Post, and Lewis, Rice & Fingersh, L.C. is acting as legal advisor.

BofA Merrill Lynch and Goldman Sachs are acting as financial advisors to Michael Foods, and Fried, Frank, Harris, Shriver & Jacobson LLP is acting as legal advisor.