ConAgra Foods to acquire Ralcorp for $6.8bn

US-based ConAgra Foods has entered into an agreement to acquire Ralcorp, a leading manufacturer of private label food in the US, in a deal valued at approximately $6.8bn, including the assumption of debt.

According to the terms of the agreement, ConAgra will pay $90 per share in cash, which represents a premium of 28% to the closing price of Ralcorp’s common stock on 26 November 2012.

The acquisition will create one of the largest packaged food companies in North America, with annual sales of around $18bn and a combined workforce of more than 36,000.

It will also position ConAgra Foods as a leading private label packaged food business in North America, with sales of about $4.5bn.

The deal is in line with ConAgra Foods’ Recipe for Growth strategy, established 18 months ago, which is aimed at expanding the private label segment, strengthening the core business and adjacencies, and international expansion.

ConAgra Foods chief executive officer Gary Rodkin said that the acquisition will enable the company to apply its expertise in the growing private label segment.

"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," Rodkin added.

The transaction, which is subject to the approval of Ralcorp’s shareholders and customary regulatory approvals, is expected to be completed by 31 March 2013.

ConAgra expects the deal to modestly benefit its fiscal 2013 financial results.

ConAgra has been seeking to acquire Ralcorp since March 2011. Initially, the company offered $82 per share, following which it raised the bid twice to $86 per share and $94 per share, and it finally withdrew the offer after Ralcorp failed to enter into negotiations.

After rejecting the proposals, Ralcorp completed the separation of its Post Foods cereal unit in February 2012 through a tax-free spin-off to Ralcorp shareholders.

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Image: The acquisition of Ralcorp will position ConAgra Foods as one of the leading packaged food companies in North America, with annual sales of $18bn. Photo courtesy of ConAgra Foods.