Post and THL sign agreement to form new subsidiary for food business

US-based consumer packaged goods company Post Holdings (Post) has signed an agreement with private equity firm Thomas H Lee Partners (THL) to form a new business known as 8th Avenue Food & Provisions (8th Avenue).

THL is expected to provide $250 as part of the final proceeds under the deal, while the new subsidiary will assume $625m in debt.

Post Holdings president and CEO Rob Vitale said: “We are excited about the potential to grow 8th Avenue Food & Provisions.

“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 arrangement will see Post receive total proceeds of $875m and retain a 60.5% stake in 8th Avenue, while the remaining 39.5% interest will be held by THL.

Post will participate in 8th Avenue’s growth by holding a significant stake in the business, while reserving the option to pursue a tax-efficient separation of its remaining position in the newly formed entity.

Post noted that it will use the net proceeds to pay off a portion of its existing $2.2bn term loan in order to reduce its pro forma net leverage ratio to 5.5x.

The completion of the deal is expected to take place in October and will be subject to certain closing conditions, including the expiration of waiting periods under the US antitrust laws.

Post will appoint five members to 8th Avenue’s Board of Directors as part of the agreement, while THL is slated to appoint one member.

The management teams of 8th Avenue, Post and THL now intend to develop opportunities for the newly created business going forward.