Nabisco to Sell Cold Cereal Business to Philip Morris : Acquisitions: Shredded Wheat and other company brands will join Kraft’s Post lineup.

Philip Morris Cos. said Monday that it will buy the U.S. and Canadian ready-to-eat cold cereal businesses of RJR Nabisco Holdings Corp. for $450 million in cash.

The purchase, by Philip Morris unit Kraft General Foods Inc., will also include certain international trademarks.

The deal will make Kraft the third-largest cereal maker, after Kellogg Co. and General Mills Inc.

The deal comes two weeks after General Mills’ decision to call off its agreement to buy RJR Nabisco’s cereal business, which includes Nabisco Shredded Wheat, Spoon-Sized Shredded Wheat and Shreddies.

Philip Morris said Kraft will incorporate the Nabisco lines into its Post line of breakfast cereals, which are sold through Kraft General Foods’ distribution systems in the United States and Canada.

“We believe that this acquisition is strategically significant for us,” said Richard Mayer, chairman and chief executive of Kraft General Foods, North America.

“The ready-to-eat cereal category has great potential for expanded growth and operating income.”

General Mills dropped the deal, citing the prospect of a prolonged review by federal and state regulators.

Analysts said regulators would have had concerns about a dominant player in the cereal market gaining a larger share of the market through acquisition.

“This has a much better chance of going through the Federal Trade Commission,” Dean Witter Reynolds analyst Lawrence Adelman said of Kraft’s proposed purchase.

The Nabisco purchase will boost Kraft General Food’s share of the cereal market to 14.5% of cereal sold, from 11.5%, analysts said.

General Mills, on the other hand, already had a much weightier 24.8% market share when it considered buying the Nabisco cereals.

“To keep really viable in the industry you have to add to your share,” said First Boston analyst Rebecca Barfield. “Introducing new products is risky, so this is a good way to acquire more share.”

Dean Witter’s Adelman said the purchase was a constructive development for Philip Morris.

“It’s positive because it expands their position in one of the highest-margin growth areas in the domestic packaged food business,” Adelman said.

Philip Morris said the acquisition, subject to regulatory review in the United States and Canada, would include Nabisco’s cereal production facilities in Naperville, Ill., and Niagara Falls, Ontario.