After an earlier rejection, ConAgra upped its bid from $82 to $86 a share on Wednesday in an attempt to expand its presence in the booming private label sector. Apart from Ralcorp’s iconic Post branded cereals, the company also has an extensive range of private label products, including cookies and crackers, snack nuts, cereals, dry pasta, jams and syrups, among others. A takeover would boost ConAgra’s private label sales from about $850m to about $4bn a year.
However, Ralcorp rejected the bid within hours. In order to ensure the company’s continued independence, its board of directors also said it has adopted a shareholders’ rights plan, otherwise known as a ‘poison pill’, intended to prevent a hostile takeover, the details of which will be filed with the US Securities and Exchange Commission.
Ralcorp's chairman William Stiritz said in a statement: "Ralcorp, as an independent company, has a proven track record of delivering superior results and shareholder value, having delivered total shareholder returns of 418% over the past 10 years and 114% over the past five years.
“We are confident that Ralcorp has a strategic plan and a proven management team that will continue to generate significant shareholder value in the future. Our board of directors affirms its commitment to Ralcorp as an independent company."
Announcing the bid yesterday, ConAgra’s CEO Gary Rodkin said: “We believe this all-cash proposal is highly attractive to Ralcorp's shareholders and a transformational growth opportunity for both companies.”
In a letter to Stiritz, he also pointed out that shareholders representing as much as 60 percent of Ralcorp’s stock also have shares in ConAgra.
“We believe Ralcorp shareholders would appreciate the strategic and financial logic of the combination and the opportunity to participate in its future,” he wrote.
ConAgra has been seeking to enter into discussions with Ralcorp since late February, without success.