FTC halts private label cereal deal

The Federal Trade Commission (FTC) has filed a lawsuit opposing Post Holdings Inc.’s $110 million acquisition of TreeHouse Foods’ private brand cereal business, claiming the two companies are only two of three significant manufacturers of private label ready-to-eat cereals in the U.S.

The FTC says the move would give Post a more than 60% share and eliminate competition between the companies.

“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 FTC’s Bureau of Competition.

The administrative lawsuit delays the acquisition, and the two companies could not provide a timeframe on the move or if it could happen at all. They released statements:

“We are disappointed and perplexed by the FTC’s decision to attempt to block a combination that produces more effective competition in the $9 billion ready-to-eat cereal category,” said Rob Vitale, Post’s President and CEO. “We will work with TreeHouse to develop an appropriate course of action.” 

Steve Oakland, CEO and President of TreeHouse called the FTC blocking 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.”

Post’s acquisition of TreeHouse was first announced in May. In addition to private brand cereals, Post Holdings, St. Louis, makes popular cereal brands such as Raisin Bran, Alpha-bits, Fruity Pebbles and more. Oak Brook, Ill.-based TreeHouse Foods, maker of private label foods and beverages, sold its snacks division in July to Atlas Holdings for $90 million.  

As part of the filing, the FTC is seeking a temporary restraining order and a preliminary injunction in federal court, if necessary, to prevent the parties from consummating the merger.