US food giant Kraft Foods has agreed to sell its Hot Cereals operations, which include the Cream of Wheat brand, and related assets to B&G Foods, for approximately US$200m.

The sale includes the Cream of Wheat and the Cream of Rice brands as well as certain manufacturing equipment, Kraft said. According to Kraft, the Cream of Wheat brand alone had net revenues of approximately $60m in 2006.

"Our decision to sell Cream of Wheat is part of a broader effort at Kraft to focus our portfolio," said Rick Searer, president of Kraft North America Commercial. "The divestiture allows us to focus our resources on businesses that offer potential long-term competitive advantages for us, creating value for Kraft shareholders, while providing B&G Foods with a great business."

In anticipation of the sale, which remains subject to regulatory approval, Kraft recorded a pre-tax asset impairment charge of $69m in the fourth quarter of 2006. Kraft added that the sale is expected to be dilutive by approximately $(0.01) per share in 2007.

David L. Wenner, CEO of B&G Foods, said: "We are very pleased to add the Cream of Wheat and Cream of Rice brands to our portfolio of brands. Cream of Wheat is a strong brand name in the growing hot cereal category, and a brand that we think will do well within B&G Foods.

Wenner said the acquisition was consistent with B&G's strategy of acquiring smaller, higher-margin brands. "We expect the acquisition to improve the already healthy margin structure of B&G Foods and to be accretive to our company's free cash flow," he said. "This is yet another example of B&G Foods' ability to grow dynamically through acquisition."

B&G Foods said it expected to fund the acquisition with additional debt, and in order to complete the transaction had received financing commitments for senior secured debt financing from Lehman Brothers Inc. and Credit Suisse.