ConAgra to Buy Private Label Producer Ralcorp

OMAHA, Neb. -- In a deal estimated valued at $6.8 billion, ConAgra Foods Inc. is set to acquire Ralcorp Holdings Inc. The agreement creates one of the largest food companies in North America with sales of approximately $18 billion a year and more than 36,000 employees.

As part of the move, which was unanimously approved by both companies' board of directors, Ralcorp shareholders will receive $90 per share in cash for outstanding share of common stock held. The price tag also includes the assumption of debt. The deal is expected to close by March 31, 2013.

Shares of Ralcorp rocketed more than 26 percent higher in trading on the New York Stock Exchange this afternoon.

Ralcorp is the largest manufacturer of private label food in the United States. With the transaction, ConAgra will become the largest private label packaged food business in North America with combined private label sales of approximately $4.5 billion. Its existing private label business is valued at approximately $950 million.

"We are very pleased to have reached an agreement with Ralcorp after a period of collaborative dialogue between the two companies. Ralcorp is already the largest private label food company in the U.S. and is well positioned for future growth," explained Gary Rodkin, CEO of ConAgra Foods. "The acquisition of Ralcorp is a logical and exciting step for ConAgra Foods. Adding Ralcorp provides us with a much larger presence in the attractive and growing private label segment and accelerates our Recipe for Growth strategy."

Rodkin added that the transaction will allow ConAgra to use its "scale and combined operational expertise to this important growth area, and will strengthen our position as one of the leading food companies in North America. We believe the balanced combination of our very significant branded food business, the largest private label food business in North America, and our important commercial food businesses, will enable ConAgra Foods to deliver even greater value and innovation to our customers and consumers, and sustainable profitable growth to our shareholders," he said.

ConAgra Foods established its Recipe for Growth strategy 18 months ago, which includes expansion in the private label segment, growth in its core business and adjacencies, and expansion internationally. According to industry analysts, private label now represents 18 percent of sales in the packaged food market in the United States and has consistently demonstrated growth in excess of the overall food market over time.

The two companies' portfolios are a complementary fit, with very little overlap in terms of offerings. Ralcorp's leading private label offerings include cereal, pasta, crackers, jellies and jams, syrups, frozen waffles and more. Ralcorp's total annual sales of approximately $4.3 billion also include a branded and commercial/foodservice portfolio.

With Ralcorp, ConAgra Foods is expected to have a balanced portfolio with a stronger growth profile. The transaction is also expected to increase ConAgra Foods' importance to customers and consumers, with product offerings across a wide range of price points, segments and channels.

"Clearly, consumer dynamics have changed since the recession and we expect growth in private label food to continue to outpace growth in branded food," Rodkin said. "At the same time, we remain very proud of and fully committed to our brands, which will remain the largest part of our business and are found in 97 percent of America's households. We believe our combination of branded, private label and commercial offerings, supported by leading functional capabilities, represents a unique and balanced approach that allows us to address the full range of customer and consumer requirements and adapt to the changing demands of the food industry."


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