ConAgra (CAG) Stock Higher on Ralcorp Purchase

Shares of ConAgra Foods, Inc. (CAG: Charts, News) closed up +1.34 or +4.74 percent to $29.63 per share on Tuesday after the company announced it had agreed to acquire Ralcorp Holdings, Inc. (RAH: Charts, News) for $6.8 billion including debt.

Ralcorp Holdings stock closed up +18.57 or +26.44 percent to $88.80 per share. The acquisition will create the largest private label packaged food business in North America, adding to ConAgra's existing business worth $950 million annually with an estimated $4.5 billion in combined sales. Daily Chart
Omaha, Nebraska based ConAgra Foods, Inc. has been in business for almost a century and makes and sells a variety of food products carrying some of the most recognized name brands in North America. Brands names such as Hunts, Banquet, Hebrew National, Slim Jim and Marie Callender's make up just a few of ConAgra's wide array of food products. St. Louis, Missouri based Ralcorp Holdings, originally part of Ralston Purina will add to ConAgra's existing private label business and contribute brands such Krusteaz, American Italian Pasta Co. and Bakery Chef. Ralcorp recently spun off its Post Foods subsidiary after an unsuccessful attempt to sell the unit to rivals or private equity firms. The $90 per share offer follows an unsuccessful attempt by ConAgra to buy Ralcorp earlier this year for $94 per share, without assuming debt and valued at $4.9 billion. Ralcorp Holdings is the country's largest producer of food sold under private labels and will contribute to ConAgra's $950 million annual private label business. The combined company is projected to rake in $18 billion in annual sales with $4.5 billion coming from private label business alone. Private labels such as Safeway's (SWY: Charts, News) Open Nature have been gaining five percent per year since 2007, versus growth of only one percent annually for national brands which spend money for packaging and advertising. While the deal was unanimously approved by both boards, a law firm, Bernstein Liebhard LLP is conducting an investigation on whether Ralcorp Holding's board had breached its duty to stockholders in negotiating the sale of Ralcorp to ConAgra. The investigation will focus on the process for approving the transaction and whether the $90 per share sale price is fair to Ralcorp shareholders. ConAgra stock reacted favorably to the news on Tuesday, rising more than four percent. The company maintained its outlook for earnings next year of $2.03 - $2.06 per share excluding benefits from the transaction and adjusted for some items. After the announcement, ConAgra CEO Gary Rodkin stated that, "This transaction gives us an even stronger platform across sales channels and price points, increasing our importance with customers and suppliers," he continued, "Together, we'll be the largest private-label food manufacturer in North America, a clear leader in this business segment that's growing faster than branded food." The deal is expected to be completed by March 31st, 2013. Other News About CAG ConAgra-Ralcorp May Lead to More Private-Label Foods M&A WSJ article on more potential takeovers in the food industry. ConAgra Foods Becomes Largest Foodmaker Agriculture site article on the effects of the acquisition. Other Stocks in the News BP Appears in Court to Enter Criminal Plea Over Spill Oil giant enters not guilty plea to charges related to 2010 Gulf of Mexico oil spill. Costco Sets $7-Share Special Payout; Comp Sales Up Special dividend to be paid out in December. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Nov 28, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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