Project Description

Post Spin-off of BellRing Brands Notes

August 27, 2021 Update

The most recent  was Post Holdings (POST) announcing that it will be distributing a significant holding in BellRing Brands (BRBR), an active nutrition business (think protein shakes, bars, etc.). I published some research on it when the initial spin-off happened (IPO of a portion of BRBR). The current announcement looks really interesting. Post currently owns 97.5MM units/shares (71.2% of shares outstanding) of BRBR. It plans to distribute to shareholders 78MM shares of BRBR to POST shareholders through a spin-off or share exchange (or some combination of the two).  It plans to retain 19.5MM (currently valued at $585MM) units/shares which it plans to exchange to reduce its debt. Prior to the spin-off, Bellring will pay out a special dividend to all shareholders (including Post).  How big could the dividend be?  I think it would be reasonable to take net leverage to 3.0x to 5.0x EBITDA. Consensus expects 2023 EBITDA to be $284MM. Currently net debt $516MM.  A 3.0x to 5.0x net debt / EBITDA multiple for Bellring implies a special dividend of $2.50 to $6.60 per share.

The transaction will be finalized in the first half of 2022. And we just saw some meaningful insider buying from Bellring’s management team. The other interesting angle is Post potentially looks very cheap pro-forma for its spin-off of Bellring. It has a market cap of $7.2BN and its stake in BRBR is worth $3.0NN. BRBR represents 42% of POST’s market cap but only 22% of EBITDA. Post’s remaining business is challenged (exposure to breakfast cereal) but its nonetheless an interesting situation. More work to do.  Shout out to Low Tide Investments for highlighting this opportunity.