Post Holdings To Join S&P MidCap 400 Index

by: Inelegant Investor - February 1st, 2012   Add Comment

S&P announced that, as of the close of trading on February 6, Post Holdings(POST) will join its former parent, Ralcorp(RAH) in the S&P MidCap 400 Index. Post will replace Comstock Resources(CRK) which will be moving to the smallcap index. Post will be distributed to shareholders of Ralcorp at the close of trading on February 3.

Disclosure: The author holds no position in any stock mentioned

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As Post Begins Trading When Issued,No Free Toy In This Cereal Box

by: Inelegant Investor - January 27th, 2012   1 Comment

Post Cereals(POST) began trading today on a when issued basis.  Currently, it’s settled in around $26.50 with a range of $22.75 to $27.50.  But what is it actually worth?

One share of Post stock will be distributed on February 3 to for every 2 shares owned of Ralcorp(RAH) as of January 30, so those who buy Ralcorp today are still getting the spin. The IRS has ruled that the distribution will be tax-free to shareholders.

The company will distribute approximately 27.6 million shares and keep up to 6.9 million shares for itself.  These 34.5 million shares represent a market cap of $914 million at $26.50 per share. Post will be quite leveraged, as Ralcorp is burdening it with $775 million in new bonds, and pulling $900 million in cash out of the business, which Ralcorp will use to retire its own debt and buy back stock.

Last week, Ralcorp released additional financial information and projections regarding Post. The company projects that in 2012, it will generate $205 million to $225 million of what the company calls “Adjusted EBITDA” we view this as a poor measure of the company’s health given the heavy debt load it will face.  In addition, this number does not include significant expenses associated with becoming a stand alone public company, and it assumes sales growth that may be unrealistic. We believe the company’s net income will be somewhere in the $20-$40 million range for the year, making it difficult to justify purchasing at the current price. If the company can actually increase share and approach the top end of our range, we might expect strong profit growth if the company can begin to pay down debt, but for now, we think this is to be avoided at the current price.  Ralcorp, with its improved balance sheet, may be a better choice, but we’ll leave that discussion for a future post.

Disclosure: The author holds no position in any stock mentioned.

 

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Ralcorp Sets Dates, Ratio For Post Spin

by: Inelegant Investor - January 17th, 2012  

Ralcorp’s(RAH) spinoff of Post(POST) is finally coming into view.  Ralcorp announcedthis morning that Post

The Post Cereals logo.

shares will be distributed on February 3 to Ralcorp shareholders of record as of January 30.  Investors will receive 1 Post share for every 2 shares of Ralcorp they own.  Approximately 34.5 million Post shares will be outstanding following the distribution.  Post shares are expected to begin trading on a when-issued basis on January 26. The spinoff reverses Ralcorp’s acquisition of Post just four years ago. As part of the transaction, Ralcorp has leveraged Post significantly, leaving the company under a significant debt load which will either sink it or create an opportunity for big gains in deleveraging, but in either event, may hinder its ability to promote its strong branded offerings.

Disclosure: Author holds no position in any stock mentioned

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Ralcorp Still Posting Post Spin At End Of January, Announces New Boards Of Directors

by: Inelegant Investor - January 17th, 2012  

We’ve previously discussed Ralcorp’s(RAH) plans to spin off Post Cereal(POST) here, here and when it was

Ralcorp

announced in July.  The company issued a press release yesterday, reiterating that it is on track for completion at the end of January, and announcing the Boards of Directors for each company. Brief biographies as provided by Ralcorp:

The following are brief biographies of those individuals who will serve on the Board of Directors of Ralcorp Holdings, Inc.:

  • J. Patrick Mulcahy is currently Vice Chairman of the Board of Directors of Ralcorp Holdings, Inc. He has served as Chairman of the Board of Directors of Energizer Holdings since January 2007 and previously served as Vice Chairman of that company from 2003 to 2007. Upon completion of the separation of Ralcorp and Post, Mr. Mulcahy will become Chairman of the Board of Directors of Ralcorp Holdings, Inc.
  • Benjamin Ola. Akande, Ph.D., is a professor of Economics and Dean of the George Herbert Walker School of Business and Technology at Webster University in St. Louis, Missouri.
  • Bill G. Armstrong is a private equity investor and serves on the Board of Directors of Energizer Holdings, Inc. Mr. Armstrong previously served as Executive Vice President and Chief Operating Officer for Cargill Animal Nutrition. Prior to that, he served as Chief Operating Officer of Agribrands International, Inc.
  • Jonathan E. Baum is Chief Executive Officer and Chairman of George K. Baum & Company, an investment banking firm in Kansas City, Missouri.
  • Barry H. Beracha is a private equity investor and serves on the Board of Directors of Hertz Global Holdings, Inc.  Mr. Beracha previously served as Executive Vice President of Sara Lee Corp., Chief Executive Officer of the Sara Lee Bakery Group, and as Chairman and Chief Executive Officer of The Earthgrains Company, which was spun off from Anheuser-Busch Companies, Inc.
  • Kevin J. Hunt was appointed Chief Executive Officer and President of Ralcorp Holdings, Inc., effective January 1, 2012.  Mr. Hunt previously served as Co-Chief Executive Officer and President of Ralcorp from September 2003 to December 2011.
  • David W. Kemper is Chairman, President and Chief Executive Officer of the bank holding company, Commerce Bancshares, Inc.  Mr. Kemper is also a director of Tower Properties Company.
  • Patrick J. Moore is President and Chief Executive Officer of PJM Advisors, LLC, an investment and advisory firm in Clayton, Missouri.  He recently served as Chief Executive Officer of Smurfit-Stone Container Corporation.  Mr. Moore is a director of ITT Exelis Corp. and of Archer Daniels Midland Company.
  • David R. Wenzel has served as Director, Revenue and International of Edward Jones since September 2009 and previously served as Vice President, Global Finance of Covidien Imaging Solutions.

The following are brief biographies of those individuals who will serve on the Board of Directors of Post Holdings, Inc.:

  • William P. Stiritz is a private equity investor and has served as Chairman of the Board of Directors of Ralcorp Holdings, Inc. since 1994.  He previously served as Chairman and Chief Executive Officer of Ralston Purina Company.  Mr. Stiritz will retire from Ralcorp’s Board of Directors upon completion of the separation of Ralcorp and Post.
  • David R. Banks is a private equity investor and has served on the Board of Directors of Ralcorp Holdings, Inc. since 2001.  He previously served as Chairman and Chief Executive Officer of Beverly Enterprises, Inc., an operator of nursing facilities and rehabilitation clinics, and as a director of Nationwide Health Properties.  Mr. Banks will retire from Ralcorp’s Board of Directors upon completion of the separation of Ralcorp and Post.
  • Terence E. Block is President and Chief Operating Officer of Post Holdings, Inc. He served as President of Nestle Purina’s North American pet food business and prior to that, he served as Chief Operating Officer, North American Pet Foods for Ralston Purina Company.
  • Jay W. Brown is a retired senior executive with a long general management career in large consumer-oriented businesses.  He served as Partner at Westgate Equity Partners and prior to that, Mr. Brown served as Chief Executive Officer of Protein Technology International, Continental Baking Company and of Van Camp Seafood Company.  Mr. Brown is a former director of Jack in the Box and of Agribrands International.
  • Edwin H. Callison has been Senior Vice President of Wirtz Beverage Group since 2008 and previously served as President and General Manager for Judge & Dolph’s Spectrum division. Prior to that, he spent more than 20 years in various leadership positions at Callison Distributing in Belleville, Illinois. Mr. Callison serves on the Boards of Directors of Wine and Spirits Wholesalers of America and Wine and Spirits Distributors of Illinois.
  • Gregory L. Curl is President and Head, Latin America with the investment company, Temasek Holdings.  During his banking career spanning more than 30 years, Mr. Curl previously served in a number of senior executive roles including Vice Chairman of Corporate Development and Chief Risk Officer at Bank of America.
  • Dr. William H. Danforth is a trustee and Chancellor Emeritus of Washington University in St. Louis, Missouri.  He served as Chancellor of the university from 1971 until his retirement in 1995.  Dr. Danforth served as a director of Ralcorp Holdings, Inc. from 1994 to 1999 and of Ralston Purina Company from 1969 until 2001, when Nestle S.A. acquired the company.
  • Robert E. Grote is a private equity investor and served as General Counsel and Vice President, Administration for Washington Steel Corporation.
  • David P. Skarie served as Co-Chief Executive Officer and President of Ralcorp Holdings, Inc. from September 2003 until his retirement in December 2011.  He has also served on the Board of Directors of Ralcorp Holdings, Inc. since 2003.  Mr. Skarie will retire from Ralcorp’s Board of Directors upon completion of the separation of Ralcorp and Post.

Disclosure: The author holds no position in any stock mentioned

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Ralcorp Buys Post, 4 Years Later Spins It Off, Forgets To Admit Failure

by: Inelegant Investor - January 3rd, 2012   1 Comment

Our friends over at My Investing Notebook recently dug up Ralcorp’s(RAH) comments from its 2007 acquisition of Post Cereals, and compared them to its comments regarding this month’s spin off of Post(POST) as an independent company. We were salivating to buy the stock based on the mouth-watering descriptions of future profits to be had as a result of… both transactions. Ralcorp was, and is, primarily a private label manufacturer.  Its failure to capitalize on and support the branded Post cereals is probably not surprising, but it would be nice if management acknowledged its failure as it paints its rosy picture of the future. Many spinoffs do have their roots in previous acquisitions, though usually  a longer period of time elapses before the acquirer throws in the towel.

Disclosure: The author holds no position in any stock mentioned

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Ralcorp Announces A Few More Details On Post Spinoff

by: Inelegant Investor - December 23rd, 2011  

It’s been nearly 6 months since Ralcorp(RAH) announced plans to spin off Post Holdings and not much has changed.  The interest that had been expressed by Conagra(CAG) never materialized into a transaction as Ralcorp management

Ralcorp

continued to reject buyout offers. Today, the company took the mildly unusual step of issuing a press release noting that it has amended its Form 10.  The release noted that the new company, which will trade on the NYSE under the ticker POST, will be distributed around the end of January 2012.  Also noted was that Ralcorp will extract $900 million in cash from Post prior to the spinoff, funded by debt which will stay with Post. In July, we had noted that this was expected to be in the $1.1 billion to $1.2 billion range, so this may imply that Post was unable to borrow the full amount anticipated. Ralcorp plans to use the cash to reduce debt, make acquisitions, and buyback stock.  Ralcorp will also retain up to 20% of Post.

Today’s filing shows that Post lost $368.9 million in 2011 on a pro-forma basis, but that includes a $503.5 million non-cash charge for impaired goodwill, writing down the cost of Ralcorp’s purchase of Post.  It would seem that the company has sufficient cash flow to both service and pay down debt.  At the right price, investors may be able to take advantage of a consistently profitable business with results improving as it incrementally deleverages.

Disclosure: The author holds no position in any stock mentioned

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