WASHINGTON — The Federal Trade Commission on Dec. 19 filed an administrative complaint challenging St. Louis-based Post Holdings, Inc.’s proposed $110 million acquisition of the private label ready-to-eat cereal business of TreeHouse Foods, Inc., Oak Brook, Ill.
According to the F.T.C., Post and TreeHouse are two of only three “significant” manufacturers and distributors of private label R.-T.-E. cereal in the United States. The agency said that, if allowed to go through, the acquisition would “give Post more than a 60% share of an already highly concentrated market and eliminate the vigorous competition between them to serve grocers across the country.”
The proposed merger also would remove the competitive pressure that has driven higher quality and lower priced cereals for U.S. consumers, said the F.T.C., which has been reviewing the transaction since July.
“Households nationwide benefit from the robust competition between Post and TreeHouse, and a merger between these companies would likely lead to higher prices and reduced quality of the store-brand cereals that consumers enjoy today,” said Ian Conner, deputy director of the F.T.C.’s Bureau of Competition.
The F.T.C. said it has authorized its staff to seek a temporary restraining order and a preliminary injunction in federal court, if necessary, to prevent Post and TreeHouse from completing the merger.
The F.T.C.’s filing of the administrative complaint is based on its standing that it has a “reason to believe” that the law has been or is being violated, and it appears to the F.T.C. that a proceeding is in the public interest. The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge. The administrative trial is scheduled to begin on May 27, 2020.
Post first announced its intent to acquire the private label R.-T.-E. cereal business of TreeHouse Foods in May 2019. The R.-T.-E. cereal business generated $268 million in sales in 2018. It has a range of manufacturing capabilities and features two plants in Lancaster, Ohio, and Sparks, Nev. Upon closing, Post Holdings said it would integrate the business into its existing North American R.-T.-E. cereal business.
TreeHouse Foods acquired the R.-T.-E. cereal business from Conagra Brands as part of the Private Brands transaction in 2016.
In a Dec. 19 statement following the F.T.C.’s complaint filing, both companies’ chief executive officers expressed disappointment with the commission’s decision.
“We are disappointed and perplexed by the F.T.C.’s decision to attempt to block a combination that produces more effective competition in the $9 billion ready-to-eat cereal category,” said Robert V. Vitale, president and c.e.o. of Post. “We will work with TreeHouse to develop an appropriate course of action.”
Steven T. Oakland, president and c.e.o. of TreeHouse, added, “The F.T.C.’s decision to block the combination of our ready-to-eat cereal business with Post is unfortunate. We are highly disappointed because we believe the transaction would enable Post to offer retail customers a full suite of ready-to-eat cereal offerings. We are in the process of reviewing our next steps, but in the meantime, we remain committed to delivering high quality products and great customer service to our customers.”
As a result of this development, the companies said they cannot provide a timeframe in which they expect the transaction to close, if at all.