ConAgra finally wins Ralcorp in $5 billion store-brand food bet

Tue Nov 27, 2012 3:50pm EST
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By Martinne Geller and Siddharth Cavale

(Reuters) - ConAgra Foods Inc (CAG.N: Quote) sealed a deal to buy Ralcorp Holdings Inc RAH.N for $5 billion, more than a year and a half after first bidding on it, turning the maker of Chef Boyardee pasta into the top U.S. producer of store-branded foods.

ConAgra said on Tuesday it will pay $90 per share in cash, a premium of 28 percent to Ralcorp shares' closing price on Monday.

The deal creates a packaged food giant with $18 billion in annual sales -- from branded foods like Slim Jim meat snacks and Hunt's ketchup to foods that stores brand as their own.

It marks a victory for ConAgra Chief Executive Gary Rodkin, who began pursuing Ralcorp in March 2011 with an offer of $82 per share. After raising its bid twice, ConAgra walked away from its then-final offer of $94 per share, which valued Ralcorp at $5.2 billion.

"The circumstances were different than they are today, but the strategy is the same," Rodkin told Reuters. "We have been very, very true to our strategy."

Rodkin said last year ConAgra wanted to acquire more brands and expand its footprint in private label, where sales growth has often outpaced that of branded food, especially as offerings improve and consumer spending remains limited by lingering unemployment. The company has struck deals for several purchases since being spurned by Ralcorp.

The deal is also a win for activist investor Keith Meister, founder of Corvex Management, Ralcorp's largest shareholder. Corvex demanded in August that Ralcorp either sell itself, buy another company or change its strategy, after a disappointing performance following its refusal to talk to ConAgra and the subsequent spin-off of Post Holdings (POST.N: Quote).

Meister, who founded Corvex in 2010 after seven years with Carl Icahn, joined the Ralcorp board in October.   Continued...

ConAgra Foods world headquarters are seen in an undated publicity photo. Long-time suitor ConAgra Foods Inc finally sealed a deal to buy Ralcorp Holdings Inc for $5 billion to become the biggest private label food company in North America. REUTERS/ConAgra/Handout