ConAgra clinches $6.8B deal for Ralcorp - The Deal Pipeline (SAMPLE CONTENT: NEED AN ID?)
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ConAgra clinches $6.8B deal for Ralcorp

by Lou Whiteman  |  Published November 27, 2012 at 10:04 AM
ConAgra Foods Inc. on Tuesday said it would acquire Ralcorp Holdings Inc. for $6.8 billion, finally winning a deal for the private label food giant more than a year after first approaching the company.

Omaha-based ConAgra said it would pay $90 per share in cash for Ralcorp, a premium of 28.2% over the target's Monday close. But the bid, which values Ralcorp's equity at about $5 billion and also includes assumed debt, is below the $94 per share, or $7.4 billion, ConAgra had offered last year.

Ralcorp, of St. Louis, rejected that offer last year in favor of a plan to spin off cereal maker Post Holdings Inc. It also did bolt on deals including acquiring cookie maker Petri Baking Products Inc. But the decision angered at least one shareholder, with 5.1% holder Corvex Management LP in August calling for Ralcorp to either sell itself or merge with a competitor.

The sale to ConAgra would create one of the largest packaged food companies in North America with about $18 billion in annual sales and more than 36,000 workers. The buyer said that the combination would have about $4.5 billion in private-label sales, up from ConAgra's current $950 million in private label sales, ranking the company as the largest business in that fast-growing sector.

ConAgra CEO Gary Rodkin in a statement called the deal "a logical and exciting step" for his company, saying it should expand the company's supermarket presence.

"The transaction will allow us to apply our 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," Rodkin said. "Clearly, consumer dynamics have changed since the recession and we expect growth in private label food to continue to outpace growth in branded food."

ConAgra said the deal would be financed primarily with cash on hand, existing credit facilities and new borrowings, with the company receiving a commitment letter from Bank of America Merrill Lynch for new borrowings. The company said it is committed to retaining its investment-grade credit rating, and could issue up to $350 million of equity.

The deal is ConAgra's largest acquisition in a recent build up of its private label brands. In July, the company agreed to acquire the Bertolli and P.F. Chang's Home Menu frozen meal business from Unilever plc for $265 million in cash. In April, ConAgra bought family-owned frozen breakfast sandwich maker Odom's Tennessee Pride Sausage Inc. for undisclosed terms.

Centerview Partners LLC and Bank of America Merrill Lynch are serving as financial advisers to ConAgra Foods. Davis Polk & Wardwell LLP is serving as its legal adviser.

Barclays and Goldman, Sachs & Co. are advising Ralcorp along with Wachtell, Lipton, Rosen & Katz.

Tags: Bank of America Merrill Lynch | Barclays | Bertolli | Centerview Partners LLC | ConAgra Foods Inc. | Corvex Management LP | Davis Polk & Wardwell LLP | Gary Rodkin | Goldman Sachs & Co. | Odom's Tennessee Pride Sausage Inc. | P.F. Chang's | Petri Baking Products Inc. | Post Holdings Inc. | Ralcorp Holdings Inc. | Unilever plc | Wachtell Lipton Rosen & Katz

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Lou Whiteman

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