NEW YORK, Nov 15, 2007 (AFP) - US food group Kraft Foods will sell its Post Cereals business to Ralcorp Holdings in a deal worth some 2.6 billion dollars, the companies said Thursday.

The all-stock transaction is worth approximately 2.6 billion dollars, including the assumption of debt, they said in separate statements.

The deal calls for Kraft to distribute Post Cereals and its related assets to its shareholders in either a split-off or spin-off transaction.

Following completion of the transaction, current Ralcorp shareholders would hold 46 percent of the combined company. Current Kraft shareholders would own the remaining 54 percent of the combined company.

The deal calls for the assumption of about 950 million dollars in debt. Including the value of the Ralcorp stock issued, the transaction is worth about 2.6 billion dollars. Ralcorp's stock closed at 55.47 dollars Wednesday.

Kraft highlighted the tax advantages of the transaction. To have achieved an equivalent amount in a taxable transaction, Kraft said it would have needed to receive about four billion dollars in cash for the business.

The Post cereals business had net revenues of about 1.1 billion dollars in 2006. Its brands, mainly distributed in North America, include Honey Bunches of Oats, Pebbles, Shredded Wheat, Selects, Grape Nuts and Honeycomb.

Kraft said the transaction also includes four Post manufacturing plants, three in the United States and one in Canada. About 1,250 Kraft employees are expected to be hired by Ralcorp.

The companies said the transaction was expected to close in mid-2008.

Kraft explained the sale of the cereals business would allow it to better focus on its growth strategy.

The Northfield, Illinois-based food and beverage company, which regained its independence after being sold by tobacco giant Altria in March, also owns brands such as Nabisco cookies and crackers, Jacobs coffee, Milka chocolate and Philadelphia cream cheese.

Ralcorp, a leading producer of private-label, or store-brand, foods, said the transaction is expected to increase sales by 50 percent to 3.3 billion dollars a year from 2.2 billion, with Post cereals accounting for approximately 32 percent of total annual sales.