Ralcorp, which has just agreed to buy Sara Lee's North American refrigerated dough business in a $545m deal, rejected ConAgra’s $94-a-share cash offer, arguing it was not in shareholders' best interests.
Chairman William Stiritz said: “The separation of Post Foods from Ralcorp will better allow each company to focus on strategies specific to their particular businesses, thereby unlocking additional significant value for our shareholders. We are firmly committed to this plan and therefore, we have unanimously determined that we have nothing further to discuss.”
ConAgra: 'Extremely disappointed'
But ConAgra noted that its latest offer represented “a nearly 10% increase” on its $86 per share offer made in May, and chief executive Gary Rodkin said he was “extremely disappointed” by Ralcorp's response.
"Contrary to its shareholders' best interests, Ralcorp rejected the revised proposal within 24 hours and with no discussions with ConAgra Foods.”
In a letter to Ralcorp, Rodkin said that by remaining independent, Ralcorp's private label business would be “more susceptible to the margin pressures from commodity cost volatility”, while an independent Post Foods would face the “uncertainty of operating as a highly leveraged company in the competitive cereal category without the benefit of a broader portfolio".
He added: “As part of our broader portfolio, both Ralcorp private label and Post would be better positioned to drive performance.”
What happens next?
ConAgra - best known for its Hebrew National hot dogs and Hunt's canned vegetables - may now seek to launch a hostile bid for Ralcorp, which makes Post branded cereals, private-label foods for retailers, and frozen bakery products for in-store bakeries and foodservice customers.
However, some analysts have predicted it may decide to wait until after the Post spin-off before launching a fresh bid.
Rodkin would not comment on his next move, but said ConAgra would “continue to consider its options with respect to this potential transaction”.