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Creates one of the largest North American packaged food companies
and the largest North American private label packaged food business
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Accelerates ConAgra Foods’ Recipe for Growth strategy and further
leverages its capabilities
-
Expected to be accretive to EPS in Year 1, strengthen ConAgra
Foods’ top-line and EPS growth potential over the long term, and
provide significant annual cost synergies
OMAHA, Neb. & ST. LOUIS, Mo.--(BUSINESS WIRE)--Nov. 27, 2012--
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.
Gary Rodkin, chief executive officer of ConAgra Foods said, “We are very
pleased to have reached an agreement with Ralcorp after a period of
collaborative dialogue between the two companies. Ralcorp is already the
largest private label food company in the U.S. and is well positioned
for future growth. The acquisition of Ralcorp is a logical and exciting
step for ConAgra Foods. Adding Ralcorp provides us with a much larger
presence in the attractive and growing private label segment and
accelerates our Recipe for Growth strategy. The transaction will allow
us to apply our scale and combined operational expertise to this
important growth area, and will strengthen our position as one of the
leading food companies in North America. 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. We look forward to
working with Ralcorp’s experienced and talented team to capitalize on
opportunities and create value for shareholders, and to welcoming
Ralcorp’s employees to the ConAgra Foods family.”
Kevin J. Hunt, chief executive officer and president of Ralcorp, said,
“We are proud of Ralcorp’s track record of shareholder value creation
and view this transaction as the culmination of those efforts. This
combination delivers immediate and compelling cash value to our
shareholders and benefits to our customers and employees. We 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. On behalf of the
Ralcorp Board and management team, we thank our dedicated employees for
their continued hard work, which has enabled us to grow Ralcorp to a
position of strength with our many private label offerings across both
retail and commercial channels. We look forward to joining with ConAgra
Foods to complete this exciting transaction and capitalize on our future
growth opportunities.”
Strong Strategic Rationale
The acquisition of Ralcorp adds to ConAgra Foods’ existing private label
business of approximately $950 million to create the largest private
label packaged food business in North America, with approximately $4.5
billion in combined annual private label sales. Ralcorp fits well with
ConAgra Foods’ Recipe for Growth strategy, set 18 months ago, which
includes expansion in the private label segment, growth in its core
business and adjacencies, and expansion internationally. 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. ConAgra Foods’
combination with Ralcorp creates an enhanced platform that will allow
ConAgra Foods to capitalize on, and contribute to, that compelling
long-term growth trend while generating significant efficiencies.
Ralcorp has strengthened its leadership position in private label
through recent strategic acquisitions and enhanced customer
relationships. The two companies’ portfolios are a complementary fit,
with very little overlap in terms of offerings. Ralcorp’s leading
private label offerings include cereal, pasta, crackers, jellies and
jams, syrups, frozen waffles, and more. Ralcorp’s total annual sales of
approximately $4.3 billion also include a branded and commercial /
foodservice portfolio.
The combined company will have significant operating capabilities across
its branded, private label and commercial / foodservice businesses,
including:
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A robust Sales and Marketing function that drives top-line growth
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A strong Research, Quality and Innovation platform
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A management team with deep industry experience and strong talent
across the organization
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A core understanding of delivering value to the customer and consumer
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A consumer and shopper insights-driven focus
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Procurement and risk management expertise
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Well-developed productivity capabilities and experience with complex
supply chains
With Ralcorp, ConAgra Foods will have a balanced portfolio with a
stronger growth profile. The transaction is also expected to increase
ConAgra Foods’ importance to customers and consumers, with product
offerings across a wide range of price points, segments and channels.
The enhanced breadth and depth of the combined portfolio is expected to
allow ConAgra Foods to build deeper customer relationships and drive
additional category growth.
Gary Rodkin, chief executive officer of ConAgra Foods, added, “Clearly,
consumer dynamics have changed since the recession and we expect growth
in private label food to continue to outpace growth in branded food. At
the same time, we remain very proud of and fully committed to our
brands, which will remain the largest part of our business and are found
in 97% of America’s households. We believe our combination of branded,
private label and commercial offerings, supported by leading functional
capabilities, represents a unique and balanced approach that allows us
to address the full range of customer and consumer requirements and
adapt to the changing demands of the food industry.”
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.
Integration
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.
Advisors
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.
More information on the transaction can be found at www.conagrafoodstransaction.com.
Conference Call Details
ConAgra Foods will host a conference call at 8:30 am EST/7:30 am CST
today to discuss the announcement. Domestic and international
participants may access the conference call toll-free by dialing
1-888-312-3047 (US/Canada Toll Free) and 1-719-457-2606 (International
Toll) respectively, and using the passcode 1466942. This conference
call, along with webcast presentation materials, can also be accessed
live on the company’s Investor Relations website at http://investor.conagrafoods.com.
To access a replay of the conference call, please dial 1-888-203-1112
(US/Canada Toll Free) or 1-719-457-0820 (International Toll), passcode
1466942.
Ralcorp also issued a separate release today announcing its fourth
quarter and full fiscal year 2012 earnings results, which is available
on the investor section of the company’s website at www.ralcorp.com.
About ConAgra Foods, Inc.
ConAgra Foods, Inc., (NYSE: CAG) is one of North America's leading food
companies, with brands in 97 percent of America's households. Consumers
find Banquet®, Chef Boyardee®, Egg Beaters®, Healthy Choice®, Hebrew
National®, Hunt's®, Marie Callender's®, Orville Redenbacher's®, PAM®,
Peter Pan®, Reddi-wip®, Slim Jim®, Snack Pack® and many other ConAgra
Foods brands in grocery, convenience, mass merchandise and club stores.
ConAgra Foods also has a strong business-to-business presence, supplying
frozen potato and sweet potato products as well as other vegetable,
spice and grain products to a variety of well-known restaurants,
foodservice operators and commercial customers. For more information,
please visit us at http://www.conagrafoods.com.
About Ralcorp Holdings, Inc.
Ralcorp produces a variety of private‐brand foods sold under the
individual labels of various grocery, mass merchandise and drugstore
retailers, and frozen bakery products sold to in-store bakeries,
restaurants and other foodservice customers. Ralcorp’s diversified
product mix includes: ready‐to‐eat and hot cereals; nutritional and
cereal bars; snack mixes, corn‐based chips and extruded corn snack
products; crackers and cookies; snack nuts; chocolate candy; salad
dressings; mayonnaise; peanut butter; jams and jellies; syrups; sauces;
frozen griddle products including pancakes, waffles, and French toast;
frozen biscuits and other frozen pre‐baked products such as breads and
muffins; frozen and refrigerated doughs; dry pasta; and frozen pasta
meals. For more information about Ralcorp, visit the Company’s website
at www.ralcorp.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are based on ConAgra Foods’ current
expectations and are subject to uncertainty and changes in
circumstances. These forward-looking statements include, among others,
statements regarding expected synergies and benefits of a potential
combination of ConAgra Foods and Ralcorp, expectations about future
business plans, prospective performance and opportunities, regulatory
approvals and the expected timing of the completion of the transaction.
These forward-looking statements may be identified by the use of words
such as “expect,” “anticipate,” “believe,” “estimate,” “potential,”
“should” or similar words. There is no assurance that the potential
transaction will be consummated, and there are a number of risks and
uncertainties that could cause actual results to differ materially from
the forward-looking statements made herein. These risks and
uncertainties include the timing to consummate a potential transaction
between ConAgra Foods and Ralcorp; the ability and timing to obtain
required regulatory approvals and satisfy other closing conditions,
including the approval of Ralcorp’s shareholders; ConAgra Foods’ ability
to realize the synergies contemplated by a potential transaction;
ConAgra Foods’ ability to promptly and effectively integrate the
business of Ralcorp and ConAgra Foods; the availability and prices of
raw materials, including any negative effects caused by inflation and
adverse weather conditions; the effectiveness of its product pricing,
including any pricing actions and promotional changes; future economic
circumstances; industry conditions; ConAgra Foods’ ability to execute
its operating and restructuring plans; the success of ConAgra Foods’
innovation, marketing, including increased marketing investments, and
cost-saving initiatives; the competitive environment and related market
conditions; operating efficiencies; the ultimate impact of ConAgra
Foods’ product recalls; access to capital; ConAgra Foods’ success in
effectively and efficiently integrating its acquisitions; actions of
governments and regulatory factors affecting ConAgra Foods’ businesses,
including the Patient Protection and Affordable Care Act; the amount and
timing of repurchases of ConAgra Foods’ common stock, if any; and other
risks and uncertainties discussed in ConAgra Foods’ filings with the
SEC, including its most recent annual report on Form 10-K and subsequent
reports on Forms 10-Q and 8-K. Investors and security holders are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date they are made. ConAgra Foods
disclaims any obligation to update or revise statements contained in
this press release to reflect future events or circumstances or
otherwise.
Additional Information and Where to Find It
Ralcorp intends to file with the SEC a proxy statement in connection
with the proposed merger. The definitive proxy statement will be sent or
given to the shareholders of Ralcorp and will contain important
information about the proposed merger and related matters. RALCORP
SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT
BECOMES AVAILABLE. The proxy statement and other relevant materials
(when they become available), and any other documents filed by Ralcorp
with the SEC, may be obtained free of charge at the SEC’s website, at www.sec.gov.
In addition, security holders will be able to obtain free copies of the
proxy statement from Ralcorp by contacting Investor Relations by mail at
Attention: Investor Relations, 800 Market Street, St. Louis, Missouri
63101.
Participants in the Solicitation
Ralcorp and its directors and executive officers may be deemed to be
participants in the solicitation of proxies from Ralcorp shareholders in
connection with the proposed merger. Information about Ralcorp’s
directors and executive officers is set forth in its proxy statement for
its 2012 Annual Meeting of Shareholders, which was filed with the SEC on
January 13, 2012, and its Annual Report on Form 10-K for the year ended
September 30, 2011, which was filed with the SEC on December 14, 2011
and on September 12, 2012. These documents are available free of charge
at the SEC’s website at www.sec.gov,
and by mail at Attention: Investor Relations, 800 Market Street, St.
Louis, Missouri 63101, or by going to Ralcorp’s Investor Relations page
on its corporate website at www.ralcorp.com. Additional information
regarding the interests of participants in the solicitation of proxies
in connection with the proposed merger will be included in the proxy
statement that Ralcorp intends to file with the SEC.
Source: ConAgra Foods, Inc.
For ConAgra Foods:
Investor Inquiries
Chris
Klinefelter, 402-240-4154
Vice President, Investor Relations
or
Media
Inquiries
Teresa Paulsen, 402-240-5210
Vice President,
Communication & External Relations
or
Brunswick Group
Steven
Lipin / Gemma Hart
212-333-3810
For Ralcorp:
Investor Inquiries
Matt Pudlowski,
314-877-7091
Director, Business Development
or
Media
Inquiries
Joele Frank, Wilkinson Brimmer Katcher
Eric
Brielmann / Eric Bonach / Aaron Palash
212-355-4449