ConAgra (CAG) to Acquire Ralcorp (RAH) for $90/Share

November 27, 2012 7:01 AM EST
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ConAgra Foods, Inc. (NYSE: CAG) and Ralcorp Holdings, Inc. (NYSE: RAH) today announced that the boards of directors of both companies have unanimously approved a definitive agreement under which ConAgra Foods will acquire Ralcorp, the largest manufacturer of private label food in the U.S. Under the terms of the agreement, Ralcorp shareholders will receive $90.00 per share in cash for each outstanding share of common stock held, representing a 28.2% premium to the closing price of Ralcorp’s common stock on November 26, 2012, and a 24.9% premium to the average closing price of Ralcorp’s common stock for the 30 trading days ending November 26, 2012. The transaction is valued at approximately $6.8 billion, including the assumption of debt.

This transaction creates one of the largest packaged food companies in North America, with sales of approximately $18 billion annually and more than 36,000 employees. It will also position ConAgra Foods as the largest private label packaged food business in North America, with combined private label sales of approximately $4.5 billion.

Compelling Financial Benefits

ConAgra Foods expects the transaction to provide attractive sales and EPS growth over time. Because this transaction is expected to close by March 31, 2013, management expects it to have a modest benefit on fiscal 2013 financial results and will quantify that benefit in the coming months. Excluding any benefit from this transaction, ConAgra Foods’ expectations for fiscal 2013 fully diluted EPS remain unchanged at $2.03 to $2.06, adjusted for items impacting comparability. ConAgra Foods will provide additional details regarding the favorable impact of this transaction on its financial outlook for fiscal years 2013 and 2014, as well as its favorable impact on the company’s long-term financial algorithm, in due course as integration plans, the pace of expected synergies, and the financing components of the transaction are finalized.

ConAgra Foods intends to use its strong infrastructure and productivity capabilities to drive significant cost synergies from this transaction, primarily in the areas of supply chain and procurement efficiencies. It expects to achieve approximately $225 million of cost synergies on an annual basis by the fourth full fiscal year after closing.

The acquisition of Ralcorp is expected to be financed primarily with cash on hand, existing credit facilities and new borrowings, for which ConAgra Foods has received a commitment letter from BofA Merrill Lynch.

ConAgra Foods is fully committed to its investment grade credit rating, and consistent with that commitment, expects to issue up to $350 million of equity. ConAgra Foods will prioritize rapid deleveraging in the near term through its strong cash flow generation. The company currently expects to maintain its dividend of $1.00 per share on an annual basis and will significantly reduce its share buyback activities for a period of time. ConAgra Foods remains committed to its long-term capital allocation priorities, including a top-tier dividend, strong balance sheet and strong liquidity.


ConAgra Foods and Ralcorp will establish a transition team comprised of members of both management teams to prepare for and to oversee the integration of the businesses.

Terms and Conditions

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


Centerview Partners and BofA Merrill Lynch are serving as financial advisors to ConAgra Foods and Davis Polk & Wardwell LLP is serving as its legal advisor. Barclays and Goldman, Sachs & Co. are serving as Ralcorp’s financial advisors and Wachtell, Lipton, Rosen & Katz is serving as its legal advisor.

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