Post Holdings Working With Bankers on Possible Lamb Weston Deal

Post Holdings is consulting with investment bankers about a potential transaction with Lamb Weston Holdings, a frozen potato products manufacturer under pressure from an activist investor to sell.

Svea Herbst-Bayliss and Abigail Summerville of Reuters, who cited two people with knowledge of the situation, claimed that Lamb Weston has long been a desirable company for Post, a packaged goods company that produces Bob Evans mashed potatoes and Grape Nuts cereal. In 2015, when the French fries manufacturer was still a part of Conagra, Post considered purchasing Lamb Weston.

According to sources who insisted on anonymity since the conversations are confidential, Post is currently looking for methods to acquire Lamb Weston once more and is speaking with financiers in the close-knit food industry. If a merger were to take place, there would be significant synergies between Post, which has a market value of about USD7bn, and Lamb Weston, which has a market value of about USD10.5bn, according to the sources.

“Representatives for Post and Lamb Weston declined to comment,” the authors wrote.

In a regulatory filing two months ago, activist investor Jana Partners stated that it had acquired an approximately 5% position in Lamb Weston and that it wants the business to enhance its capital allocation and operations before considering a sale. The stock price increased by almost 10% as a result of the announcement.

Lamb Weston's shares just closed at USD79.27, up over 7%, reducing its year-to-date decline to 25.6%.

Jana has identified a number of business leaders, including Timothy McLevish, the former executive chairman of Lamb Weston, as possible board candidates while working on the transaction with the holding company Continental Grain.

Jana has a past with Lamb Weston and pushed Conagra, the company's owner at the time, to sell it off in 2015. In 2016, Lamb Weston went public on the stock exchange. The activist is now pressuring Lamb Weston to reform or risk being challenged on the board.