Ralcorp Still An Acquisition Target Despite Its Post Plans, Analyst Says

July 19, 2011
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Ralcorp’s announcement late last week that its intends to spin off Post Foods doesn’t change its status as a potential takeover target, says Erin Lash, equity analyst at Chicago-based investment research firm Morningstar.


“We continue to believe that Ralcorp remains in play as a potential acquisition target. Building out its presence in the private label market remains a strategic priority for ConAgra,” Lash notes. ConAgra has a $4.9 billion offer on the table for Ralcorp and quickly said after Ralcorp’s Post announcement that it still wants to buy the entire company.


Ralcorp’s own acquisition of Post Foods is now looking like a less-than-savvy business decision.


“Just three years after acquiring the Post brand from Kraft for about $2.7 billion, Ralcorp has decided to focus exclusively on its private label roots,” she says. “From our perspective, the Post acquisition will ultimately prove to be a value-destroying investment for Ralcorp shareholders. Further, we aren’t convinced that Post’s competitive positioning will improve as a stand-alone operation.”


Under its proposed shareholder spinoff of Post, Ralcorp will receive $1 billion, or $1.7 billion less than it paid for Post.

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