Kraft set to sell Post cereals for $2.8 billion

Report: Food giant near deal with rival Ralcorp Holdings

updated 11:29 a.m. ET Nov. 5, 2007

NORTHFIELD, Ill. - Shares of Kraft Foods Inc. climbed Monday after a published report said the nation's biggest food and beverage maker was nearing a deal to sell its Post cereal division for about $2.8 billion.

Kraft, the No. 3 U.S. cereal maker, has nearly two dozen cereal labels, including Shredded Wheat, Grape-Nuts and Alpha-Bits.

Citing unidentified sources "familiar with the matter," The Wall Street Journal reported Monday that the Northfield-based company was planning to sell its cereal brands to St. Louis-based Ralcorp Holdings Inc., which makes store-brand cereals and foods.

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Representatives from both Kraft and Ralcorp did not immediately return calls seeking comment Monday.

Kraft CEO Irene Rosenfeld, who took the helm of the struggling company a year ago, has launched a massive turnaround effort aimed at revitalizing sales of the company's brands, which include household names such as Maxwell House, Kool-Aid and Oscar Mayer.

As part of an effort to better focus its portfolio, Kraft sold its hot cereal business, including its popular Cream of Wheat products, to a subsidiary of B&G Foods Inc. for $200 million in January. Last month, it sold its Fruit2O water and Veryfine beverage brands to Sunny Delight Beverages Co. for an undisclosed sum.

Last year, Kraft sold its Minute Rice brand and Milk-Bone pet snacks.

Kraft doesn't break out sales of Post cereals, but the company's snack and cereal segment earned $829 million last year on sales of nearly $6.7 billion.

The Journal reported a cereal sale would likely be a stock-based deal that would involve a spinning off the cereal business and then later merging it with Ralcorp.