A sign for ConAgra Foods' world headquarters in Omaha, Neb.(Photo: Nati Harnik AP)
OMAHA, Nebraska -- ConAgra Foods (CAG) has agreed to buy
private-label food producer Ralcorp (RAH) for about $5 billion, which
will make it North America's biggest manufacturer of cereals, crackers
and other packaged foods sold under store labels.
consumer dynamics have changed since the recession, and we expect growth
in private-label food to continue to outpace growth in branded food,"
ConAgra CEO Gary Rodkin said.
He said the company remains committed to its brands, which include Chef Boyardee, Egg Beaters and Peter Pan.
Ralcorp's products include pasta, cereals, snacks, sauces and frozen bakery products.
Foods said Tuesday that the acquisition will strengthen its overall
position in the North American packaged food business.
The combined company will have total sales of about $18 billion annually and more than 36,000 workers.
will pay Ralcorp Holdings stockholders $90 per share, a 28% premium to
its Monday closing price of $70.23. Ralcorp currently has about 55
million outstanding shares, according to FactSet.
Ralcorp's stock jumped $18.71, or 26.6%, to $88.95 in premarket trading. Shares of ConAgra gained 72 cents, or 2.6%, to $29.01.
believe the two companies are a great fit, and our employees will
benefit as part of a larger diversified organization with the necessary
scale and resources to be a leader in today's rapidly evolving
marketplace," Ralcorp CEO Kevin Hunt said in a statement.
companies value the transaction at about $6.8 billion when debt is
included. ConAgra said it plans to finance the acquisition mostly with
available cash, existing credit facilities and new borrowings. It
expects about $225 million in cost savings on an annual basis by the
fourth full fiscal year after the deal closes.
The deal, which was
unanimously approved by both companies' boards, is expected to close by
March 31, 2013. It still needs Ralcorp shareholder approval.
said the buyout should have a modest benefit on its fiscal 2013
financial results. The company still anticipates fiscal 2013 earnings in
a range of $2.03 to $2.06 per share, excluding any benefit from the
Analysts predict earnings of $2.06 per share.