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Barclays, Others Commit $1.765B in Post Holdings’ Acquisition of Michael Foods

April 18, 2014, 07:46 AM

Post Holdings, Inc., a consumer packaged goods holding company, 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.

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.

Editor's Note: The following is excerpted from an 8-K filing:

Debt Commitment Letter
Concurrently, and in connection with entering into the Merger Agreement, Post entered into a commitment letter (the “Debt Commitment Letter”) with Barclays Bank PLC (“Barclays”), Credit Suisse AG (“CS”), Credit Suisse Securities (USA) LLC (“CS Securities”), Wells Fargo Bank, National Association (“Wells Fargo Bank”), WF Investment Holdings, LLC (“Wells Fargo Investment”), and Wells Fargo Securities, LLC (“Wells Fargo Securities”), pursuant to which, subject to the conditions set forth therein, Barclays, CS, Wells Fargo Bank, and Wells Fargo Investment have committed to provide to Post up to $1,765 million in credit facilities, comprised of (i) a senior secured first lien term loan facility of $1,425 million (the “Term Loan”) and (ii) an unsecured senior increasing rate bridge loan of up to $340 million (the “Bridge Loan,” and collectively with the Term Loan, the “Facilities”). Barclays, CS Securities, and Wells Fargo Securities will act as joint lead arrangers for the Facilities, subject to certain rights of Post to appoint additional arrangers. The proceeds of the Facilities will be used to partially finance the aggregate purchase price and to pay costs, fees, and expenses related to the acquisition transaction.

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.

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