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
) 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
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Published on Nov 28, 2012
By Jay Hawk