ConAgra Foods Inc. (CAG) made an offer to acquire Ralcorp (RAH)
in a boosted $4.9 billion deal that would expand ConAgra's presence
in the private-label sector and create the third-largest U.S.
packaged-food company.
ConAgra is offering $86 a share, a 3.2% premium to Ralcorp's
closing price on Tuesday. The stock had already gained 17% since
last Thursday's close as media speculation built about ConAgra's
approach. The offer also includes the assumption of about $2.5
billion in debt.
The offer comes after Ralcorp late Sunday confirmed it had
received and rejected a takeover offer during March but didn't
disclose the bidder. ConAgra on Wednesday said its initial offer in
March was $82 a share.
ConAgra said the combination of ConAgra Foods' approximately
$850 million private label business with Ralcorp would result in
approximately $4 billion in combined annual private label sales.
The combined entity would be well-positioned to capitalize on the
attractive private label sector in the U.S., which over the last
five years, has grown from 16.4% of sales in the supermarket
channel to 18.9%.
The combined company would have a sales mix of about 50% retail
branded, 25% commercial-foodservice and 25% private label,
according to ConAgra.
ConAgra expects the combined operations will result in annual
cost savings of about $250 million a year by the third year after
the deal closes, mostly from supply-chain efficiencies.
Ralcorp has been on its own acquisition spree in recent years,
buying pasta maker American Italian Pasta Co. last year and Post
cereal brands, which include Fruity Pebbles and Honey Bunches of
Oats, in 2008.
Shares of ConAgra and Ralcorp closed Tuesday at $24.75 and
$83.33, respectively. Neither were active premarket.
-By Tess Stynes, Dow Jones Newswires; 212-416-2481; Tess.Stynes@dowjones.com