Ralcorp Rejects $4.9 Billion Takeover Bid by ConAgra Foods

The proposed transaction would expand ConAgra Foods' presence in the fast-growing private label segment and create the No. 3 U.S. packaged food company, focused on delivering value to customers across both branded and private label.

5/5/2011 --- Ralcorp Holdings, Inc. has announced that its board of directors has unanimously determined that the unsolicited non-binding proposal by ConAgra Foods announced yesterday is not in the best interests of shareholders. The board of directors rejected the proposal after careful consideration with the assistance of its independent financial and legal advisors.

Ralcorp's chairman, William Stiritz, commented, "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."

Ralcorp also announced that its board has adopted a shareholder rights plan, details of which will be contained in a Form 8-K to be filed with the U.S. Securities and Exchange Commission. The rights plan is intended to enable all of the company's shareholders to realize the long-term value of their investment in the Company, and reduce the likelihood that any person or group would gain control of the company by open market accumulation or otherwise without paying a control premium for all shares.

Yesterday ConAgra Foods, Inc., announced that it made a proposal to the Ralcorp Holdings, Inc. Board of Directors to acquire Ralcorp for $86 per share in cash, or approximately $4.9 billion, plus the assumption of $2.5 billion in debt. The proposed transaction would expand ConAgra Foods' presence in the fast-growing private label segment and create the No. 3 U.S. packaged food company, focused on delivering value to customers across both branded and private label.

The all-cash proposal to acquire all outstanding common shares of Ralcorp represents a compelling premium of 31.7% to Ralcorp's closing price on March 21, 2011, the day before an initial $82 proposal in cash and stock was sent to Ralcorp by ConAgra Foods; a 24.9% premium to Ralcorp's one-month average closing price as of April 28, 2011, the day prior to recent speculation in the press; and a 20.4% premium to Ralcorp's closing price on April 28, 2011, which was also the stock's 52-week closing high as of that date.

Ralcorp is a successful manufacturer of both private label and branded consumer foods. The company, which owns the Post cereal brand, is also a leader in a number of private label categories, including cereal, pasta, crackers, jellies / jams, syrups, frozen waffles and other products.

"We believe this all-cash proposal is highly attractive to Ralcorp's shareholders and a transformational growth opportunity for both companies," said Gary Rodkin, chief executive officer of ConAgra Foods. "Ralcorp has made significant progress with its businesses, and we are excited about the prospect of building on its number one position in private label and enhancing its iconic brands, like Post, in very important categories." Rodkin continued, "By combining our two businesses, we will create one of the top U.S. food companies, with product offerings across a wide range of price points, categories and channels. Given our experience managing both private label and consumer branded operations, we are confident in our ability to provide the right focus and resources each business needs to succeed over the long term. We believe a collaborative process is a way to deliver great value to both our companies' stakeholders, and we look forward to discussing our proposal with Ralcorp."

The proposed combination would add to the overall strength of ConAgra Foods by establishing a strong, leading presence in U.S. private label foods and enhancing its branded portfolio, which it remains committed to growing. The combination of ConAgra Foods' approximately $850 million private label business with Ralcorp would result in approximately $4 billion in combined annual private label sales. The combined entity would be well-positioned to capitalize on the attractive private label sector in the U.S. which, over the last 5 years, has grown from 16.4% of sales in the supermarket channel to 18.9%. Pro forma, the combined company would have a sales mix of approximately 50% retail branded, 25% commercial / foodservice and 25% private label. The proposed transaction fits into ConAgra Foods' growth strategy, which also includes growth of its existing business, acceleration of its presence in branded adjacent categories, and international expansion.

ConAgra Foods has a strong track record of growing its private label business in a portfolio that is largely made up of branded food and considers its ability to effectively manage both private label and branded businesses as a strategic advantage. In particular, ConAgra Foods' current private label business leverages centralized resources, including marketing and shopper insights, category management, innovation, quality and food safety, and supply chain capabilities, which would benefit the combined entity.

ConAgra Foods believes the proposed combination would also enhance Ralcorp's portfolio and business momentum by capitalizing on ConAgra Foods' research, quality and innovation expertise to grow branded businesses like Post, as well as private label cereal, bars, pasta, snacks and frozen bakery.

ConAgra Foods intends to leverage its existing infrastructure and productivity capabilities to drive significant cost synergies. The company estimates the proposed combination will result in approximately $250 million in annual cost savings by the third year after closing, primarily from supply chain efficiencies. The company is also confident this transaction will improve its current sales and EPS growth rates as well as operating margins. ConAgra Foods will provide additional details on these matters as it finalizes its synergy estimates and financing components.