DOW JONES NEWSWIRES
Ralcorp Holdings Inc. (RAH) said Thursday it plans to spin off
the company's cereal manufacturer Post Foods, a move the food maker
said will allow the businesses to better focus on their brands.
The move also represents an additional rebuff to a takeover
effort by ConAgra Foods Inc. (CAG).
"The margin and cash flow profile of Post Foods is quite
different than Ralcorp's private brand business, and there are many
unique development opportunities for this business," said Ralcorp
Chairman William P. Stiritz.
Meanwhile, the company separately offered a weak outlook for the
fiscal third quarter and trimmed its full-year view due to
lower-than-expected branded cereal volumes and a jump in raw
materials for private-branded offerings that outpaced price
increases.
Ralcorp's shares slid 4.2% to $83 in after-hours trading, while
ConAgra's dropped 5.6% to $24.79.
The move to split Ralcorp comes after the company in May
rejected a $4.9 billion buyout offer from ConAgra, which said the
$86 a share offer wasn't in the best interest of shareholders.
ConAgra had said it remained interested in speaking with Ralcorp
about a potential deal. A ConAgra spokeswoman wasn't immediately
available to comment on Ralcorp's plan.
Ralcorp intends to complete the separation in four to six
months, in which Post Foods--the manufacturer of Honey Bunches of
Oats, Grape-Nuts and Post Raisin Bran--will be spun off to Ralcorp
shareholders in a tax-free transaction.
Following completion of the transaction, Ralcorp will continue
to trade on the New York Stock Exchange and Post Foods also is
expected to be listed on the NYSE.
Post Foods is the third-largest branded ready-to-eat cereal
manufacturer with net sales of $958 million in the trailing 12
months ended March 31. The segment's profit totaled $223 million
for the same period.
Upon completion of the planned separation, Stiritz will serve as
chairman of Post Foods while J. Patrick Mulcahy, vice chairman,
will serve as chairman of Ralcorp. Co-Chief Executive and President
Dave Skarie will retire at the end of the year, while the other
co-CEO and president, Kevin Hunt, will solely assume responsibility
for those roles upon completion of the separation.
The company has also established a search committee to seek
candidates for the role of CEO of Post Foods.
Ralcorp sees adjusted third-quarter earnings of $1.13 to $1.18 a
share, below the $1.37 estimate of analysts polled by Thomson
Reuters.
For the year, the company now sees adjusted earnings of $5.20 to
$5.35 a share, down from its May estimate of $5.45 to $5.55.
Ralcorp reiterated that it expects recently accelerated
cost-cutting efforts to result in an additional $80 million to $100
million in operating profit over the next three fiscal years.
-By John Kell, Dow Jones Newswires; 212-416-2480;
john.kell@dowjones.com