Ralcorp To Acquire Sara Lee Private Label Refrigerated Dough Business

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August 9, 2011

Ralcorp Holdings Inc. will acquire the North American store brands refrigerated dough business of industry leader Sara Lee Corp. for approximately $545 million.

Sara Lee refrigerated dough recorded net sales in excess of $300 million for its fiscal year ended July 2010. Upon completion of the transaction, the company will operate as part of a broader Ralcorp Frozen Bakery Products division.

"We are excited about the addition of the refrigerated dough business to the Ralcorp family of products," said Kevin J. Hunt, Co-CEO and President of Ralcorp. "This transaction will allow Ralcorp to be a private brand leader in the $1.8 billion refrigerated dough category. Together with the refrigerated dough business, we will continue to provide our customers with the high-quality service and products they have come to expect from Ralcorp.”

Ralcorp said it intends to fund the transaction through short-term debt that will be repaid with the proceeds from the Post Foods separation. The company expects the acquisition to be completed in 60 to 90 days.
The business employs approximately 700 people and has manufacturing and distribution facilities in Carrollton, Texas and Forest Park, Ga.

“Given its higher margins and free cash flow, we expect this acquisition to result in the creation of significant value for Ralcorp shareholders, hunt said. “The percentage impact of this accretion will be even more significant after the Post Foods separation, as our private brand earnings base will be smaller. Given the high quality of the business, the attractive financing markets and the tax attributes and synergy potential of the transaction, this acquisition represents the continuation of our strategy of enhancing shareholder value through private brand acquisitions.”

However, the Post Foods separation probably will not be a ConAgra acquisition, as ConAgra looks increasingly unlikely to sweeten its $86 a share takeover bid for Ralcorp, according to analysts.

The spin-off plan for the cereal brand, announced last month by Ralcorp, was seen by some as a tactic to force ConAgra to raise its offer or tease out other bids – a strategy that has failed so far.

Ralcorp shares rose by nearly a quarter since ConAgra's interest was first reported, but traded at $74.29 at press time.

Ralcorp's fiscal third-quarter profit slid 47 percent as the food maker recorded a write-down charge and other items that masked a jump in revenue as overall sales volume increased, Dow Jones reported.

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