Post Holdings Inc (NYSE:POST) is said to be close to a deal to acquire Michael Foods Group Inc. for up to $2.5 billion. The private-equity owners of the food processing company are auctioning it off, and Post has been reportedly competing with Tyson Foods, Inc. (NYSE:TSN) in that auction.

Post Holdings

Post’s purchase could be revealed tomorrow

The Wall Street Journal cites unnamed sources who say the deal between Michael Foods and Post Holdings Inc (NYSE:POST) could be announced as early as tomorrow. If Post does prevail in the auction, it would be a significant acquisition for the company, which currently has a market capitalization of only around $2 billion.

Post Holdings Inc (NYSE:POST) has been working to diversify its product portfolio. It is mostly known for its breakfast cereals, although the company now offers peanut butter, pasta, protein bars and other items. Since being spun off by Ralcorp Holdings Inc. in 2012, Post has made several acquisitions, like Hearthside Food Solutions LLC.

Michael Foods’ brands

Michael Foods is headquartered in Minnetonka, Minn. It processes and distributes several different brands of food products, including Simply Potatoes, All Whites and Better ‘n’ Eggs. Egg products make up the company’s largest division according to sales. The food processor also owns Abbotsford Farms.

Goldman Sachs Group Inc (NYSE:GS)’s buyout division and Thomas H. Lee Partners LP own Michael Foods, which had net sales of $1.95 billion and $50.4 million in net earnings in the 2013 fiscal year. As of Dec. 28, the company had $1.2 billion in debt. At the time Goldman Sachs Group Inc (NYSE:GS)’s buyout arm purchased a majority stake in the company, the deal valued it at $1.7 billion, including debt. TH Lee had purchased Michael Foods from the company’s prior private-equity owners for approximately $1 billion in 2003. After the deal with Goldman Sachs, the firm kept about a 20% stake in the ompany.

Michael Foods has been paying dividends by issuing new debt since 2010. The company took out a total of $382 million from its private-equity owners.