ConAgra offers $4.9 billion for Ralcorp

by Staff
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OMAHA, NEB. — ConAgra Foods, Inc. has made a proposal to acquire Ralcorp Holdings for about $4.9 billion plus the assumption of $2.5 billion in debt. The purchase price is approximately $86 per share in cash.

“We believe this all-cash proposal is highly attractive to Ralcorp’s shareholders and a transformational growth opportunity for both companies,” said Gary Rodkin, chief executive officer of ConAgra Foods. “Ralcorp has made significant progress with its businesses, and we are excited about the prospect of building on its No. 1 position in private label and enhancing its iconic brands, like Post, in very important categories. By combining our two businesses, we will create one of the top U.S. food companies with product offerings across a wide range of price points, categories and channels. Given our experience managing both private label and consumer branded operations, we are confident in our ability to provide the right focus and resources each business needs to succeed over the long term. We believe a collaborative process is a way to deliver great value to both our companies’ stakeholders, and we look forward to discussing our proposal with Ralcorp.”

ConAgra’s proposed purchase price is a 31.7% premium to Ralcorp’s closing price on March 21 and a 20% premium to the closing price on April 28, and ConAgra believes the acquisition would add overall strength by establishing a strong presence in U.S. private label and enhancing its branded portfolio. ConAgra said the combination would result in about $4 billion in combined annual private label sales.

Ralcorp initially rejected the merger proposal, with chairman William Stiritz saying the board of directors has a high level of confidence in the management team and the future prospects of the company and is committed to executing its strategic plan. But ConAgra said it has been trying to meet with Ralcorp since Feb. 23, and any phone calls and letters since have been met with rejection.

In a letter to Ralcorp, Mr. Rodkin said, “We believe this proposal is highly attractive to Ralcorp’s shareholders, as our revised all-cash offer provides them with compelling upfront and certain value. In response to this attractive proposal, we again request that you permit us promptly to begin a conversation and due diligence with Ralcorp’s senior management so that we can verify our key assumptions about the potential of Ralcorp’s businesses and explore with you in such discussions whether opportunities exist that would justify revising our proposal to make it even more attractive to Ralcorp’s shareholders. Given the premium contained in our offer, and the potential to create further value depending on our diligence findings, we believe that it is undeniably in your shareholders’ best interests, and required by your fiduciary duties, that you meet with us to discuss and analyze this opportunity.”

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