Ralcorp Reportedly Seeks to Sell Post Division

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May 24, 2011

Ralcorp Holdings Inc., the private label manufacturing giant that in recent weeks snubbed acquisition offers from ConAgra Foods Inc., is reportedy exploring the sale of its Post cereals division in an attempt to fend off ConAgra’s  overtures, according to a Bloomberg report. 

Ralcorp has reportedly shopped Post to General Mills Inc., PepsiCo, Kellogg and B&G Foods in recent weeks, seeking almost $2 billion for the unit, according to a Bloomberg report that quoted anonymous sources close to the deal. St. Louis-based Ralcorp is also speaking with with buyout firms Blackstone Group LP, KKR & Co. and Apollo Global Management LLC, according to the report.

So far there has been little interest in Post, which generated about one-fourth of Ralcorp’s $4 billion in 2010 sales with brands such as Grape-Nuts and Alpha-Bits. The goal of any sale would be to raise cash that Ralcorp could return to shareholders to court their favor, the Bloomberg sources said.

“With the proceeds from Post, Ralcorp could maybe issue a special dividend,” said Jack Russo, an analyst at Edward Jones & Co. “Maybe it would be enough to placate Ralcorp’s shareholders.”

If unable to sell Post, Ralcorp is likely to rely on its recently adopted shareholder rights plan (or poison pill), which is intended to reduce the likelihood that any person or group could gain control of the company by open market accumulation, company executives said when the plan was adopted a few weeks ago. Ralcorp could also accelerate cost-cutting efforts to persuade shareholders of improved profitability.

For more on ConAgra’s acqusition attempt of Ralcorp, see “ConAgra's Bid for Ralcorp Could Turn Hostile.”

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