Ralcorp seen exploring alternatives to ConAgra bid

by Eric Schroeder
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ST. LOUIS — Less than a month after turning down a $4.9 billion takeover bid from ConAgra Foods, Inc., St. Louis-based Ralcorp Holdings, Inc. has explored the potential sale of its Post cereals division, according to Bloomberg.

Bloomberg said Ralcorp is seeking about $2 billion for the Post unit, and has approached General Mills, Inc., PepsiCo, Inc., Kellogg Co., and B&G Foods Inc. in recent weeks in an effort to fend off a potential hostile bid by ConAgra. Ralcorp also has discussed a sale with buyout firms Blackstone Group LP, KKR & Co. and Apollo Global Management L.L.C., Bloomberg said.

Bloomberg said there has been little interest in Post so far, and the goal of any sale would be to raise cash so that Ralcorp could return it to shareholders.

Ralcorp acquired Post from Kraft Foods Inc., Northfield, Ill., in 2008 for $2.6 billion. At the time the acquisition was announced, David P. Skarie, co-chief executive officer and president of Ralston Holdings, Inc., called it a “transforming event for Ralcorp,” adding that Post cereals would give Ralcorp “a truly distinctive line of branded cereal products plus a branded infrastructure and platform that we can build on through organic growth and acquisitions.”

But higher ingredient costs and heavy competition among the leading cereal companies contributed to a difficult year for the Post division in fiscal 2010. Operating profit in Ralcorp’s Branded Cereal Products division fell 12% in fiscal 2010 on an 8% decline in sales. The trend has carried over into the first half of fiscal 2011, with sales down 6% and operating income up only 2%.

Shares of Ralcorp closed at $90.01 on May 19, the day Bloomberg published the story, down 50c from the previous day’s close. The company’s stock remains up 38% for the year.

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