ConAgra Foods Inc.'s threat to pull its $5.2 billion proposal to acquire Ralcorp Holdings Inc. sent Ralcorp shares lower Wednesday.

Will ConAgra walk on Sept. 19, the deadline it imposed for Ralcorp to engage in negotiations? Interesting question. After all, the suitor did not raise its $94 per share cash offer -- rejected by Ralcorp's board on Aug. 12 -- when it issued its ultimatum on Tuesday.

Some risk arbitrageurs think that ConAgra has underbid and will not get Ralcorp to the table without offering closer to $100 per share. These arbs observe that ConAgra has not characterized its $94 bid as best and final; threatening to pull the proposal could be simply a tactic to drive Ralcorp's share price down and thus increase the pressure on the board to begin discussions.

In May, ConAgra bid $86 per share. Ralcorp responded with a plan to spin off its Post Foods division, which markets breakfast cereals.

The threat to drop the proposal sent Ralcorp shares down about 8.5%, or $7.35, to $77.80 Tuesday. At that price, Ralcorp shares traded at a spread of $16.10, or 20.7%, to their value in the proposed deal.

ConAgra shares also dipped about 2.6%, or 65 cents, to $23.43.

The drop in ConAgra shares suggests its shareholder base supports the Ralcorp bid at $94 per share or possibly higher.

When ConAgra bumped its bid in August it claimed to have heard from Ralcorp shareholders who wanted the company to begin deal negotiations.

ConAgra has failed to offer a price that will start negotiations and setting a deadline for a bid that has already been rejected is not going to change Ralcorp's stance, an arb said, suggesting the struggle is likely to end.

There is a piece of information missing, however, another arb said. ConAgra filed with the Securities and Exchange Commission, along with its ultimatum on the $94 bid, a presentation to the Ralcorp board, dated Aug. 31, in support of the offer. What remains unknown is what happened, if anything, between the end of August and the Sept. 13 ultimatum, the arb said.

Based on ConAgra's statement Tuesday, the parties apparently have had no meaningful contact since the August bid boost, but ConAgra did not disclose a cover letter for its presentation to the Ralcorp board, the arb said. Some letter must have existed and might have indicated a willingness on ConAgra's part to offer more, the arb speculated.

Ralcorp has a poison pill and a staggered board and is incorporated in Missouri, which has a "control share act" further complicating the hostile approach.