Post says it explored a range of structural alternatives for its private brands business, resulting in Post and THL agreeing to organize and capitalize 8th Avenue for the purpose of driving consolidation in the private brands category. Jim Dwyer will continue as president and CEO of 8th Avenue. By retaining a “meaningful ownership” of 8th Avenue, Post says it will participate in 8th Avenue’s growth while preserving the option to pursue a tax-efficient separation of its remaining position in 8th Avenue.
“We are excited about the potential to grow 8th Avenue Food & Provisions,” said Rob Vitale, president and CEO of Post. “We could not ask for a better partner than THL, and we are delighted to continue working with Jim Dwyer in further developing the business.”
The transaction is expected to be completed in October, subject to certain closing conditions, including the expiration of waiting periods under U.S. antitrust laws. Post will appoint five of the members of 8th Avenue’s board of directors, and THL will appoint one member.
Under the terms of the transaction, Post is expected to receive total proceeds of $875 million, fully monetizing the net investment Post has made in its private brands business. Final proceeds are anticipated to be funded by $250 million from THL and 8th Avenue’s assumption of $625 million of debt. Post will retain 60.5 percent of the common equity in 8th Avenue. THL will receive 8th Avenue preferred stock with an 11 percent PIK-equivalent, cumulative, quarterly compounding dividend and 39.5 percent of the common equity in 8th Avenue. 8th Avenue and its subsidiaries will become unrestricted subsidiaries of Post, and 8th Avenue debt will be non-recourse to Post. Post will use its net proceeds to pay down a portion of its existing approximately $2.2 billion term loan, reducing its pro forma net leverage ratio to 5.5x. Post will continue to provide certain services to 8th Avenue under a master services agreement.