--ConAgra agrees to buy Ralcorp for $90 a share, or $4.95
billion, after a 20 month courtship
--Deal would create the second-largest U.S. packaged food
company by sales with $18 billion
--Ralcorp shares up 26% premarket
(Adds details, including background on ConAgra's pursuit of
Ralcorp.)
By Paul Ziobro
Shares of Ralcorp jumped 26% to $88.80 in recent premarket
trading, while those of ConAgra rose 4.3% to $29.50.
ConAgra noted that the purchase adds to its existing
private-label business of about $950 million. The company said,
according to industry analysts, private label now represents 18% of
sales in the packaged food market in the U.S. and has consistently
demonstrated growth in excess of the overall food market over time.
The foodmaker also said Ralcorp's portfolio complements its own,
with very little overlap. Ralcorp's leading private label offerings
include cereal, pasta, crackers, jellies and jams, syrups and
frozen waffles.
Due to the timing of the deal's close, ConAgra said it expects
the deal to have only a "modest benefit" on next fiscal year's
results. The company said it expects to achieve about $225 million
of cost synergies on an annual basis by the fourth full fiscal year
after the deal closes.
The company said it expects to maintain its annual per-share
dividend, but will "significantly reduce its share buyback
activities for a period of time."
Ralcorp will be by far the largest acquisition in a recent spree
by ConAgra, which has been on the hunt for deals in categories
where it already sells goods, in the private-label space and
internationally. In July, the company agreed to buy Unilever's
frozen-meals businesses in North America, which sells items under
the Bertolli and P.F. Chang's brands, for $265 million.
--Saabira Chaudhuri contributed to this article.
Write to Paul Ziobro at paul.ziobro@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires