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Kraft Close To Deal With Ralston For Post Cereals

Kraft Foods is close to a deal to sell its Post cereals--including Raisin Bran, Grape-Nuts and a variety of Pebbles children's cereals--to Ralcorp Holdings, a St. Louis private-label maker of cereals and other foods, for about $2.8 billion, sources say. Kraft and Ralcorp are discussing a stock-based transaction that would free both parties from tax liability.

A sale would be part of Kraft's push to get rid of slow-growth assets under CEO Irene Rosenfeld. Post is the No. 3 U.S. cereal maker by sales after Kellogg and General Mills. The deal would raise revenue at Ralcorp by about 50% to $3.3 billion. The extra heft would enable Ralcorp to better compete with Kellogg and other rivals for space on supermarket shelves and give Ralcorp more purchasing muscle amid rising prices for wheat and other raw materials. Ralcorp makes products such as cereal and frozen waffles for retailers, which sell them under their own brand names.

Post cereal sales have been stagnant, in part because concerns about obesity among children have forced cereal makers to dial back marketing for sugary cereals.

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Read the whole story at The Wall Street Journal »

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