Kraft Foods has said it will split-off its post cereals business in a deal worth US$1.7bn with Ralcorp Holdings.

The move, initially announced last November, will see Kraft distribute all outstanding shares of its subsidiary Cable Holdco, which owns some assets and liabilities of Kraft’s Post cereals business.

Cable will combine with cereal maker Ralcorp’s Ralcorp Mailman unit.

Kraft will sell 24 Post cereal brands to Ralcorp for US$1.7bn in stock. Kraft will own 54% of the newly-created company.

In this split-off transaction, Kraft shareholders will have the option to exchange some or all of their shares of Kraft common stock and receive shares of Cable Holdco common stock, which will immediately be exchanged for shares of Ralcorp common stock following the merger. This will reduce the number of Kraft’s outstanding shares.

Approximately 30.4m shares of Cable Holdco will be offered in exchange for Kraft common stock.