(Reuters) - ConAgra Foods Inc (CAG.N) has started talks with TreeHouse Foods Inc (THS.N) and Post Holdings Inc (POST.N) regarding the sale of its private label unit Ralcorp, which could be valued at around $3.5 billion, according to people familiar with the matter.
TreeHouse, Post, and private equity firms that include Apollo Global Management LLC (APO.N) and Cerberus Capital Management LP have joined the auction for Ralcorp, which is still at its early stages, the people said this week.
The sources asked not to be identified because details of the sale process are confidential. ConAgra, Apollo and Cerberus declined comment. TreeHouse and Post did not respond to requests for comment.
Like other processed food companies, Omaha, Nebraska-based ConAgra has been facing weakening demand and has been forced to cut costs as consumers shift to foods that are perceived as healthier, such as organic products.
Ralcorp, which makes private label cereal, pasta, crackers, jams and jellies, syrups and frozen waffles, has been plagued by integration costs and pressured profit margins since it was acquired by ConAgra for $5.1 billion in 2013.
ConAgra now hopes that TreeHouse's and Post's aggressive acquisition strategies will lead to strong bids for Ralcorp, according to the sources.
ConaAgra, the maker of Chef Boyardee canned products and Slim Jim snacks, is working with Centerview Partners and Goldman Sachs Group Inc (GS.N) on the sale process, which it launched earlier this summer under pressure from activist hedge fund Jana Partners LLC.
TreeHouse’s recent purchases include better-for-you snack company Flagstone Foods for approximately $860 million. The company said on its first-quarter earnings call that it has approximately $400 million in "dry powder" and access to capital markets for further strategic acquisitions.
Post recently bought egg and dairy company Michael Foods Inc for $2.45 billion and cereal company MOM Brands for $1.15 billion.
ConAgra is seeking to sell the private label business, which also includes a bakery segment, in its entirety, rather than carving it into smaller parts, according to the sources.
Earlier this month, ConAgra said it would add two directors, including a former Nestle SA NESN.VX executive nominated by Jana, three weeks after the activist investor took a stake in the food processing company and called for changes. [ID:nL3N0ZO5W4]
Reporting by Lauren Hirsch and Greg Roumeliotis in New York; Editing by Matthew Lewis