just the facts - ConAgra Foods and Ralcorp

ConAgra Foods this morning (27 November) announced it has swooped to buy US own-label group Ralcorp Holdings, a business that rejected a number of takeover bids from the company last year. The deal, when approved, will create the largest own-label firm in North America. Here, just-food takes a closer look at both businesses.

In the 12 months to the end of September, Ralcorp recorded earnings of US$73.4m compared to a net loss of $241.2m last year. A year ago, Ralcorp posted a loss amid impairment charges on its former branded cereal business, Post. Ralcorp spun off Post earlier this year. Revenues climbed 14% to $4.32bn.

ConAgra booked a drop of 42.1% in full-year and fourth-quarter earnings in June after changes to the way its accounts for its pension costs. In its latest results in September – its first quarter – the group’s EPS was up by 177% to US$0.61 and by 42% to $0.44 on a comparable basis. Full-year sales climbed 7.8% to $13.26bn.

Ralcorp produces private-brand foods and foodservice products that are sold under individual labels of various retailers, restaurants and other foodservice customers. Its business units include Ralcorp Food Group (pasta, cereals, snacks, sauces, and spreads) and Ralcorp Frozen Bakery Products (frozen griddle and frozen dough products).

ConAgra’s business is split into two divisions: Consumer Foods and Commercial Foods. Consumer brands include Egg Beaters, Healthy Choice, Hunt’s, Orville Redenbacher’s, and Pam, as well as own-label, while its commercial food brands include Lamb Weston, Ultragrain, Sustagrain barley and Spicetec Flavors & Seasonings.

The transaction creates one of the largest packaged food companies in North America, with sales of around $18bn annually employing around 36,000 staff.

The deal will also position ConAgra Foods as the largest private label packaged food business in North America, with combined private label sales of around $4.5bn.

ConAgra said it intends to use its “strong” infrastructure and productivity capabilities to drive “significant cost synergies” from the transaction, primarily in the areas of supply chain and procurement efficiencies. It expects to achieve around $225m of cost synergies on an annual basis by the fourth full fiscal year after closing.