Not how I remember it either, but that seems to have been ConAgra’s (CAG) approach in its pursuit of Ralcorp (RAH). After three prior takeover attempts were rebuffed, the company finally succeeded in reeling in its prey for the tidy sum of $90 per share (~$5b). Ralcorp is well positioned within the private label space which is one of the most attractive spaces within the food industry. That might explain why ConAgra was so hot for the company and the deal will create a private label giant with over $18b in total annual revenues.
It is worth noting that ConAgra landed a much more slimmed down version of Ralcorp, as the company spun off its Post Holdings (POST) subsidiary earlier this year. When factoring in the spin, the price per share of the deal is actually quite higher than ConAgra’s earlier offers and represents a nice win for shareholders of the company at the time of the spinoff. Post has also done quite well since the spin with shares up over 30%.
While we often view takeover rumors regarding spinoff situations as pure speculation and not a good reason to purchase a name, there is a reason those rumors appear so frequently. Every now and then, those leaner and more focused companies actually do attract a buyer.
Disclosure: Author holds no position in any stock mentioned.
