ConAgra Foods, Inc. Offers To Acquire Ralcorp

ConAgra Foods, Inc. announced that it has 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 percent 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 percent 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 percent 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 in a prepared statement. "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 percent of sales in the supermarket channel to 18.9 percent. Pro forma, the combined company would have a sales mix of approximately 50 percent retail branded, 25 percent commercial / foodservice and 25 percent 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.

To finance the proposed $86 per share all-cash transaction, ConAgra Foods will use cash on hand and plans to issue debt. The company is committed to its investment grade credit rating. ConAgra Foods believes that the combined company would continue to generate strong cash flow and remains committed to a strong dividend.

ConAgra Foods has a high regard for Ralcorp's employees and believes that the combined company would benefit from the expertise of both companies' employees. ConAgra Foods is committed to investing in its employees and the communities in which they live and work.

An initial letter of interest was sent to the Ralcorp Holdings, Inc. board of directors on March 22, 2011, which proposed $82 per Ralcorp share, in a combination of cash and ConAgra Foods stock. This letter was sent one day after Ralcorp's stock closed at $65.31 per share. On May 4, 2011, ConAgra Foods delivered to Ralcorp's board of directors a revised proposal at $86 per share, all-cash, reiterating ConAgra Foods' desire to initiate a dialogue with the goal of consummating a transaction. ConAgra Foods will maintain a financially disciplined approach in this transaction.

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