ConAgra pulls bid for Ralcorp

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ConAgra stayed true to its word and withdrew its $5.2 billion ($94 per share), all-cash proposal to acquire Ralcorp. This follows Ralcorp's failure to enter into a "constructive" dialogue with ConAgra regarding its all-cash proposal. Ralcorp has refused to meet with ConAgra to discuss the offers on four occasions, a strategy which has came under criticism from proxy advisory firm Institutional Shareholder Services Inc.

Ralcorp plans to spin off its Post Food unit while enhancing its private-label business by purchasing Sara Lee's (SLE) refrigerated-dough business. ConAgra says the split would create additional and unnecessary overhead and transaction costs. ConAgra CEO Gary Rodkin says it will now start to look for other deals. He said, "We are ready and willing to leverage our capabilities and balance sheet for the right growth opportunities. This is a core strategic element of creating long-term value...We remain committed to growth organically, and through smart acquisitions."

ConAgra has a $3 billion war chest ($1 billion of cash and cash equivalents and credit facility worth up to $2 billion) available. Separately, ConAgra reported Q1 results highlighted by rising costs. Like every other food company, ConAgra has been trying to raise prices to offset the rising costs for meat, packaging and fats and oils - so far the price increases haven't been enough to offset. ConAgra reported earning of $85.3 million, or earnings per share (EPS) of $0.20 in Q1, compared with $146.4 million and $0.33 EPS last year. Excluding one-time items, ConAgra had EPS of $0.29. Consensus was looking for EPS of $0.31. ConAgra continues to expect fiscal 2012 full-year diluted EPS to grow at a low- to mid-single-digit rate over the comparable $1.75 it earned last fiscal year.

CONAGRA FOODS (CAG : NYSE : $22.99), Net Change: -0.40, % Change: -1.71 %, Volume: 9,488,914
RALCORP HLDGS (RAH : NASDAQ : $75.89), Net Change: 0.66, % Change: 0.88%, Volume: 1,861,70

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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