In one of the biggest deals ever, ConAgra Foods, Omaha, Nebraska, is paying $5 billion for Ralcorp Holdings, St. Louis, Missouri, creating a behemoth with projected sales of $18 billion a year including $4.5 billion in private label, more than four times what ConAgra has been making in that segment.
Ralcorp is best known for its private label cereal business, having sold off its branded lines. But it also has a stake in frozen foods, including Krusteaz frozen griddle products
(waffles, pancakes and french toast), private label versions of same, and a range of thaw-and-serve bakery products and artisan breads for in-store bakery programs.
ConAgra's frozen food lines include Banquet, Marie Callender's, Healthy Choice and Patio frozen meals, Lamb Weston potato products, and VH (a brand available only in Canada). It also produces frozen products for private label, including lines at major chains like Kroger, HEB Foods and Meijer.
Ralcorp will give ConAgra more access to retailers including Trader Joe's and Costco Wholesale, according to ConAgra CEO Gary Rodkin. ConAgra's Lamb Weston food service unit is a major supplier of frozen french fries to McDonald's, and Ralcorp's portfolio of frozen bakery products will enable ConAgra to sell breakfast offerings to restaurant chain as well, he added.
Rodkin had gone after Ralcorp in March 2011, only to be rebuffed at the time. But Corvex Management LP, a hedge fund founded by Keith Meister, subsequently acquired a stake in Ralcorp and expressed interest in reviving ConAgra's bid. Ralcorp ended up getting $90 a share, less than the $94 ConAgra previously offered, but 28% more than the stock had been selling for. With sweeteners like assumption of debt added, the deal is expected to be worth $6.8 billion when it closes in March.
