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ConAgra Ups Bid for Ralcorp to $4.9B

5/4/2011
ConAgra Foods Inc. increased a previously rejected offer for Ralcorp Holdings Inc. to $86 per share in cash, or approximately $4.9 billion, plus the assumption of $2.5 billion in debt.  The initital letter of interest was sent to the Ralcorp’s Board of Directors on March 22, 2011, which proposed $82 per Ralcorp share, in a combination of cash and ConAgra Foods stock.
 
Ralcorp is a successful manufacturer of both private label and branded consumer foods. The company, which owns the Post cereal brand, is also a leader in a number of private label categories, including cereal, pasta, crackers, jellies / jams, syrups, frozen waffles and other products.
 
The proposed transaction would expand ConAgra Foods' presence in the fast-growing private label segment and create the No. 3 U.S. packaged food company.
 
According to Gary Rodkin, chief executive officer of ConAgra Foods, "By combining our two businesses, we will create one of the top U.S. food companies, with product offerings across a wide range of price points, categories and channels. Given our experience managing both private label and consumer branded operations, we are confident in our ability to provide the right focus and resources each business needs to succeed over the long term. We believe a collaborative process is a way to deliver great value to both our companies' stakeholders, and we look forward to discussing our proposal with Ralcorp."
 
The private label sector in the United States has grown from 16.4 percent of sales in the supermarket channel to 18.9 percent in the last five years. The combination of ConAgra Foods' approximately $850 million private label business with Ralcorp would result in approximately $4 billion in combined annual private label sales, according to a ConAgra Foods press release.

Pro forma, the combined company would have a sales mix of approximately 50 percent retail branded, 25 percent commercial/foodservice and 25 percent private label. The proposed transaction fits into ConAgra Foods' growth strategy, which also includes growth of its existing business, acceleration of its presence in branded adjacent categories, and international expansion.
Stay tuned for Ralcorp’s reaction to this second offer.
 

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