B&G Foods enters agreement to acquire Cream of Wheat from Kraft
January 23, 2007
by Eric Schroeder
PARSIPPANY, N.J. — B&G Foods, Inc., a manufacturer and distributor of shelf stable foods, announced it has entered an agreement to acquire the Cream of Wheat and Cream of Rice hot cereal brands from Kraft Foods Global, Inc. for approximately $200 million. The transaction also includes certain manufacturing equipment.
"We are very pleased to add the Cream of Wheat and Cream of Rice brands to our portfolio of brands," said David L. Wenner, chief executive officer of B&G Foods. "Cream of Wheat is a strong brand name in the growing hot cereal category, and a brand that we think will do well within B&G Foods.
"This acquisition is very consistent with our strategy of acquiring smaller, higher-margin brands. We expect the acquisition to improve the already healthy margin structure of B&G Foods and to be accretive to our company’s free cash flow."
Cream of Wheat was introduced in 1893 and has grown into one of the largest recognized brands of hot cereal in the United States. Combined, Cream of Wheat and Cream of Rice generated sales of approximately $60 million in 2006.
"Our decision to sell Cream of Wheat is part of a broader effort at Kraft to focus our portfolio," said Rick Searer, president, Kraft North America Commercial. "The divestiture allows us to focus our resources on businesses that offer potential long-term competitive advantages for us, creating value for Kraft shareholders, while providing B&G Foods with a great business."
In anticipation of the sale, in the fourth quarter of 2006 Kraft recorded a pre-tax asset impairment charge of $69 million. The sale, which is subject to regulatory approval, is expected to be dilutive by approximately 1c per share in 2007, Kraft said.