(CAG) ConAgra Foods Sets Deadline for Ralcorp Holdings

ConAgra Foods Inc. (CAG) reaffirmed its $94 a share all-cash offer for the acquisition of Ralcorp Holdings Inc. (RAH), setting a deadline for the proposal, which was previously rejected by Ralcorp without a dialogue with ConAgra Foods, on August 12, 2011.

ConAgra Foods has sent an ultimatum of a week’s time to Ralcorp Holdings for negotiating on its takeover proposal and thereby announced that it would withdraw its $5.2 billion offer for Ralcorp Holdings, unless the maker of Post cereal and store-brand foods enter negotiations by September 19, 2011.

Anticipating Ralcorp’s focus on separating business, evident from continuous negotiation refusal, ConAgra sent a presentation to Ralcorp’s board of directors, emphasizing the value and certainty of the takeover proposal.

Since March, Ralcorp has rejected several bids from ConAgra, including turning down $94-per-share. In July, the company announced its plan to spin off its Post cereal business, and focus on its private-label foods business, which may derive better value for its shareholders.

Although ConAgra feels that its offer is a better deal for Ralcorp, the company cannot launch a hostile takeover bid, due to the poison pill that Ralcorp swallowed after adopting the shareholder rights plan in May.

ConAgra believes that it would achieve better value by combining the whole of Ralcorp into its business, rather than buying units. On this backdrop, the company requested Ralcorp to enter into a constructive dialogue with the terms and conditions of ConAgra Foods’ all-cash proposal for the entire business.

ConAgra Foods Inc. is one of North America’s leading food makers operating in Consumer Foods and Commercial Foods segments. The company, over time, has given a tough competition to its peers, such as HJ Heinz Co. (HNZ) and Kraft Foods Inc. (KFT) based on its cost control measures on the backdrop of rising raw material prices as well as its product-line expansion programin a highly-competitive food industry.

We maintain a Neutral recommendation on the stock backed by Zacks #4 Rank, which translates into a short-term Sell rating.

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RALCORP HLD-NEW (RAH): Free Stock Analysis Report

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