ConAgra to Buy Ralcorp in $6.8 Billion Deal

Packaged foods powerhouse ConAgra Foods (NYSE: CAG  ) will acquire  Ralcorp (NYSE: RAH  ) , the largest manufacturer of private-label food in the U.S., for $90 a share, the company announced today. This will be an all-cash deal, with ConAgra paying nearly $5 billion for Ralcorp's shares. (When debt is figured into the mix, the companies say the total deal value rises to $6.8 billion.)

In a statement describing the transaction, ConAgra said the boards of directors of both companies have approved the union that would create one of America's biggest packaged food companies, and the largest private label packaged foods business, with $4.5 billion in sales. "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," according to ConAgra.

Combined, ConAgra and Ralcorp did $17.7 billion worth of business last year (private label and branded goods), which is close to the annual sales of newly independent Kraft Foods (Nasdaq: KRFT  ) , but substantially behind the $54 billion annual business that is Mondelez International (Nasdaq: MDLZ  ) .

Billed as a friendly takeover, ConAgra and Ralcorp have been discussing a combination for some time. All that is needed now is for shareholders to approve the purchase, and for regulators to OK it. The deal is expected to close in the first quarter of 2013.

ConAgra brands include Chef Boyardee, Healthy Choice, Slim Jim, and Peter Pan. Ralcorp's wares include a variety of private‐brand foods sold under the individual labels of stores as well as frozen bakery products sold to stores, restaurants, and other food service customers. Products include cereal, cookies, snack nuts, and frozen pasta meals.

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