ConAgra Foods, Inc. has agreed to acquire Ralcorp Holdings, Inc. for $90 per share for a total transaction value of $6.8 billion, including the assumption of debt. The agreement comes after Ralcorp spurned ConAgra’s acquisition efforts in 2011.
ConAgra said the acquisition will add to ConAgra’s existing private label business of about $950 million to create the largest private label packaged food business in North America with about $4.5 billion in combined annual private label sales. Combined, the companies represent sales of about $18 billion annually and more than 36,000 employees.
ConAgra also said the combined company will have robust sales and marketing functions; a strong research, quality and innovation platform; a management team with experience and talent; an understanding of delivering value; consumer and shopper insights; procurement and risk management expertise; and well-developed productivity capabilities and experience with complex supply chains.
After Ralcorp completed its spin-off of Post Holdings, Inc. earlier this year, Ralcorp’s board on Nov. 27 announced it had agreed to ConAgra Foods’ bid of $90 per share.
"We are very pleased to have reached an agreement with Ralcorp after a period of collaborative dialogue between the two companies,” said Gary Rodkin, chief executive officer. “Ralcorp is already the largest private label food company in the U.S. and is well positioned for future growth. The acquisition of Ralcorp is a logical and exciting step for ConAgra Foods. Adding Ralcorp provides us with a much larger presence in the attractive and growing private label segment and accelerates our recipe for growth strategy.”
The transaction is expected to close by March 31, 2013, and is expected to have a modest benefit on ConAgra’s fiscal 2013 results.
Previous ConAgra attempts to buy Ralcorp were unsuccessful. In May of 2011, the board of directors for Ralcorp unanimously determined an unsolicited, non-binding proposal by ConAgra Foods was not in the best interests of shareholders.
In September of 2011 Ralcorp’s board of directors rejected a proposal from ConAgra Foods to buy Ralcorp for $94 per share in cash.
“We are proud of Ralcorp’s track record of shareholder value creation and view this transaction as the culmination of those efforts,” said Kevin Hunt, chief executive officer and president of Ralcorp. “This combination delivers immediate and compelling cash value to our shareholders and benefits to our customers and employees. We believe the two companies are a great fit, and our employees will benefit as part of a larger diversified organization with the necessary scale and resources to be a leader in today’s rapidly evolving marketplace.”
Ralcorp also released its earnings results for fiscal 2012. For the year ended Sept. 30, the company had earnings of $73.4 million, equal to $1.33 per share, which compared with a loss of $241.2 million during the previous year. Sales for the year were $4,322.2 million, up 14% from $3,787.2 million during the previous year.
For the fourth quarter ended Sept. 30, the company reported a loss of $44.2 million, which compares with a loss of $424.1 million during the same quarter of the previous year. Sales for the quarter were $1,067.3 million, up 8% from $990.4 million during the same quarter of the previous year.