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ConAgra Foods Buys Up Ralcorp for $4.95 billion

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ConAgra Foods (NYSE: CAG) announced it will acquire Ralcorp Holdings (NYSE: RAH), a private-label food producer, for about $4.95 billion on Tuesday. This transaction will create one of the largest packaged food companies in North America with 36,000 employees and annual sales of approximately $18 billion. It will also make ConAgra the largest private label packaged food business in North America, raising its private labels sales from $950 million to $4.5 billion.

The transaction is expected to be about $6.8 billion with debt included, and stockholders of Ralcorp will be paid $90 per share, 28 percent above Ralcorp's price at the end of the trading day Monday.

Ralcorp was already the largest private label food company in the U.S. and a major player in the market, particularly with moves such as the acquisition of Italian food maker Gelit Srl earlier this year. Its share price rose in the pre-market hours.

Gary Rodkin, CEO of ConAgra Foods, calls the acquisition of Ralcorp both a logical and exciting step for his company, and said that “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. We believe the balanced combination of our very significant branded food business, the largest private label food business in North America, and our important commercial food businesses, will enable ConAgra Foods to deliver even greater value and innovation to our customers and consumers, and sustainable profitable growth to our shareholders. We look forward to working with Ralcorp's experienced and talented team to capitalize on opportunities and create value for shareholders, and to welcoming Ralcorp's employees to the ConAgra Foods family.”

Private label foods are a growing market, now representing 18 percent of packaged food sales in the U.S., and this move puts ConAgra at the head of the pack.

ConAgra will use strengthened infrastructure and productivity capabilities from the merger to seek out and implement cost-saving strategies and efficiency improvements in many areas, especially in procurement and in the supply chain.

ConAgra expects positive earnings per share growth over time, starting with a largely unchanged projection of a diluted EPS of $2.03 to $2.06 in 2013. ConAgra also expects to maintain its $1.00 per share annual dividend. More details on how this merger will impact fiscal years 2013 and 2014 will be provided at a later time.

The final merger is expected to be complete by March 31st, 2013.

Posted-In: ConAgra Gelit Srl Ralcorp HoldingsNews M&A Best of Benzinga

 

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