Canadian pancake, cracker makers to go to ConAgra

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A pair of Canadian cracker manufacturing plants in Ontario and a frozen waffle and pancake business in B.C. and Ontario are expected to become ConAgra Foods’ newest Canadian assets.

The facilities would come to the Omaha-based agrifood giant from St. Louis food processor Ralcorp Holdings, which on Tuesday accepted ConAgra’s friendly takeover bid worth $90 per share, or about $6.8 billion (all figures US$).

Ralcorp, which recently spun off its Post Foods business, had rejected two previous offers this year from ConAgra, including one in September worth $94 per share before the Post spinoff was completed.

Ralcorp, billed as the largest manufacturer of private label food in the U.S. with total annual sales of about $4.3 billion, had bought waffle and pancake maker Sepp’s Gourmet Foods in June 2010, including its plants at Delta, B.C. and Brantford, Ont.

Ralcorp in May that year also bought specialty cracker maker North American Baking, formerly known as PL Foods, operating at Georgetown, Ont., and gourmet cracker maker J.T. Bakeries, operating at Kitchener, Ont.

ConAgra’s takeover of Ralcorp, which the two companies expect to complete by the end of March next year, would create one of the biggest packaged food companies in North America, with sales of about $18 billion per year and with over 36,000 employees.

The companies said Tuesday their deal would also position ConAgra Foods as the largest private-label packaged food business in North America, with combined private-label sales of about $4.5 billion.

"Dynamics have changed"

"We are proud of Ralcorp’s track record of shareholder value creation and view this transaction as the culmination of those efforts," Ralcorp CEO Kevin Hunt said in Tuesday’s release.

"This combination delivers immediate and compelling cash value to our shareholders and benefits to our customers and employees. We believe the two companies are a great fit, and our employees will benefit as part of a larger diversified organization with the necessary scale and resources to be a leader in today’s rapidly evolving marketplace."

However, ConAgra said it expects to drive "significant cost synergies from this transaction," worth about $225 million per year by the fourth full fiscal year after closing this deal. The savings would come "primarily in the areas of supply chain and procurement efficiencies."

"Clearly, consumer dynamics have changed since the recession and we expect growth in private label food to continue to outpace growth in branded food," ConAgra CEO Gary Rodkin said in the same release.

That said, ConAgra is still "fully committed to our brands, which will remain the largest part of our business and are found in 97 per cent of America’s households."

ConAgra’s stable of branded foods includes Chef Boyardee, Slim Jim, Egg Beaters, Pam, Hunt’s, Marie Callender’s, Orville Redenbacher’s and Reddi-wip, among others.

"We believe our combination of branded, private label and commercial offerings, supported by leading functional capabilities, represents a unique and balanced approach that allows us to address the full range of customer and consumer requirements and adapt to the changing demands of the food industry," Rodkin said.

Related story:
Shreddies maker buys Canadian frozen waffle firm, July 3, 2010