November 29, 2023

DealBook: ConAgra Bids $4.9 Billion for Ralcorp

9:52 a.m. | Updated After getting rebuffed earlier, ConAgra Foods announced on Wednesday that it had upped its offer for Ralcorp Holdings to $4.9 billion, in a push to expand its presence in generic products.

ConAgra, whose portfolio includes the Chef Boyardee, Orville Redenbacher, Pam and Healthy Choice brands, is bidding $86 a share in cash, about 32 percent above Ralcorp’s stock price on March 21, just before ConAgra made an unsolicited $82-a-share cash-and-stock offer for the company. Speculation about the deal emerged in late April, lifting shares of Ralcorp in recent weeks.

Although Ralcorp owns the Post brand of cereals, ConAgra’s main focus is the company’s expansive line of generic products, which includes cereal, pasta, crackers and frozen waffles. The combined company would have about $4 billion in private label sales.

“We believe this all-cash proposal is highly attractive to Ralcorp’s shareholders and a transformational growth opportunity for both companies,” Gary Rodkin, chief executive of ConAgra, said in a statement. “Ralcorp has made significant progress with its businesses, and we are excited about the prospect of building on its number one position in private label and enhancing its iconic brands, like Post, in very important categories.”

Ralcorp has been resistant to a deal.

ConAgra said in a statement that it had been trying since February to set up a meeting to discuss a potential combination. On March 22, ConAgra made a written proposal that it said was rejected by Ralcorp, first in a phone call on April 1 and again in a letter on May 1.

That day, Ralcorp revealed it had received an unsolicited offer from an unnamed third party, saying it was not in the best interest of shareholders.

“The board of directors of Ralcorp has a high level of confidence in the management team and in the future prospects of Ralcorp,” William P. Stiritz, the company chairman, said in a statement at the time. “We have not met, and are not in discussions, with any third party regarding the sale of the company.”

If Ralcorp chooses to rebuff the latest offer, the company will have a lot of tools in its arsenal to block a deal. Missouri, where Ralcorp is based, has adopted tough anti-takeover laws which will provide it with ammunition to fight off the ConAgra bid.

Ralcorp also has a staggered board, which mean it would take at least two annual meetings to replace a majority of the directors. It’s a characteristic that makes it difficult for unwelcome bidders like ConAgra to take over a company.

In recent years, Ralcorp has been on its own acquisition binge. Last year, the company bought four businesses, including American Italian Pasta Company for $1.2 billion. Ralcorp picked up Post from Kraft Foods in 2008 for $1.65 billion, plus $950 million in debt.

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