DealBook: Ralcorp Rejects ConAgra’s Sweetened $5.2 Billion Bid

Paul Sakuma/Associated PressRalcorp plans to spin off Post Cereals as it seeks to fend off ConAgra.

8:40 p.m. | Updated

Ralcorp Holdings said late Friday that its board had rejected a sweetened $5.2 billion takeover bid from ConAgra Foods, insisting instead that its plan to spin off its Post Cereals unit offers shareholders greater value.

The move again raised the possibility that ConAgra may finally turn its bid hostile, having now been rebuffed by Ralcorp three times.

In a statement, Ralcorp said it had received a letter on Thursday from ConAgra, proposing a new offer valued at $94 a share in cash. That is up from ConAgra’s last bid of $86 a share.

In the letter, ConAgra wrote that it was hoping to reach a friendly deal despite having been turned down twice, according to a person briefed on its contents. The latest offer topped Ralcorp’s highest closing price this year of $91.35.

But Ralcorp’s board determined that it preferred its current plan to spin off Post, the maker of Honey Bunches of Oats, Grape-Nuts and Cocoa Pebbles, saying this would create more value for shareholders.

“We are firmly committed to this plan and therefore, we have unanimously determined that we have nothing further to discuss,” William Stiritz, Ralcorp’s chairman, wrote in the letter.

A ConAgra spokesman declined to comment.

ConAgra has sought to bulk up its generic food offerings to help cope with rising commodity prices. Combining with Ralcorp would create a company with $4 billion in private-label sales, or roughly a quarter of revenue.

Ralcorp has said it had been exploring the spinoff of Post for some time, after having bought the business from Kraft Foods for about $1.65 billion in late 2007. But lately it has become the company’s main rejoinder to ConAgra’s bid, as executives emphasized the spinoff’s tax-free benefits to investors.

And Ralcorp has already erected other defenses, including a poison pill that would make an unwanted takeover prohibitively expensive.

Earlier this month, Ralcorp announced that it was buying the Sara Lee Corporation’s North American refrigerated dough business for $545 million, a deal meant to further bolster Ralcorp’s private-brand operations.

Shares of Ralcorp closed on Friday at $79.02, up 21.6 percent in the year to date. They rose in after-hours trading to $85.

Ralcorp is being advised by Credit Suisse and the law firms Wachtell, Lipton, Rosen Katz and Bryan Cave; ConAgra, by Centerview Partners and Bank of America Merrill Lynch.

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