Cereal maker Post Holdings Inc said it would acquire privately held rival MOM Brands Co for about $1.15 billion to expand in the growing bagged and hot cereal categories, sending its shares up as much as 9 percent.
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The maker of Raisin Bran and Honey Bunches of Oats will pay $1.05 billion in cash and issue 2.5 million shares to the owners of MOM Brands.
U.S. sales of bagged cereals grew 5.6 percent annually in the past four years, even though overall sales of cereals fell, Post said, quoting data from Nielsen.
MOM Brands, whose ready-to-eat cereals and hot wheat and oatmeal products include Malt-O-Meal, Frosted Mini Spooners, Golden Puffs, Better Oats, and Three Sisters, had net sales of $760 million in the year ended Dec. 27.
The 95-year-old company is owned by the descendants of its founder John Campbell.
Post said the combined company would have an 18 percent share of the U.S. ready-to-eat cereals market. Kellogg Co had a 32 percent market share in 2014 and General Mills Inc had 31 percent, according to Nielsen data.
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Post, which was spun off from Ralcorp Holdings in 2012, has been aggressively pursuing deals to diversify, buying small companies ranging from peanut butter maker Golden Boy Foods Ltd to dietary supplements company Premier Nutrition Corp.
Post bought egg and dairy producer and distributor Michael Foods Inc for $2.45 billion last year.
The cereal maker said on Monday that Richard Koulouris, a former president of Ralcorp's food group, would lead the combined cereal business of MOM Brands and Post.
ConAgra Foods Inc acquired Ralcorp in January 2013.
Post also estimated net sales of about $1.07 billion for the first quarter ended Dec. 31, in line with the average analyst estimate, according to Thomson Reuters I/B/E/S.
Post said it had financing commitments of up to $700 million for the deal and it planned to raise about $240 million more through a potential sale of equity.
The transaction is expected to close by the third quarter of 2015, Post said.
Barclays and Credit Suisse are Post's financial advisers for the deal and Lewis, Rice & Fingersh LC is its legal adviser. BofA Merrill Lynch is MOM Brands' financial adviser and Faegre Baker Daniels LLP is its legal adviser.
Post's shares were up 7.5 percent at $44.56 in morning trading on the New York Stock Exchange. (Reporting by Shailaja Sharma in Bengaluru; Editing by Don Sebastian and Kirti Pandey)