ConAgra's Ralcorp Bid Faces Challenges, Says Analyst

May 9, 2011
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ConAgra Foods' attempt to take over private label maker Ralcorp Holdings “might prove to be a time-consuming and expensive process,” says Erin Lash, equity analyst at Chicago-based investment research firm Morningstar.
“Ralcorp is headquartered in Missouri, where takeover laws (particularly in hostile situations) are more stringent than in other areas of the country. In addition, Ralcorp adopted a poison pill this week to ensure an acquisition was even more challenging and pricey. That said, around 50 percent of Ralcorp's shareholder base also maintain stock in ConAgra and we think that ConAgra may be willing to sweeten its offer to win over Ralcorp. As a result, from where we sit a potential tie-up is still on the table.”


ConAgra had given Ralcorp until May 12, Thursday, to accept its latest bid of $86 a share. Ralcorp’s board rejected that offer last week and ConAgra has hired a proxy solicitor to speak directly to key shareholders after that rejection.. 


“Ultimately, whether a deal gets done or not should hinge upon what's best for the shareholders of Ralston. This may mean a higher price for ConAgra, another bidder or the company remaining independent,” says Neil Stern, senior partner at the Chicago, Ill.-based research firm McMillian Doolittle LLP.

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