CEDAR RAPIDS — Employees of Ralston Foods in northeast Cedar Rapids are not expected to see significant changes following the purchase of corporate parent Ralcorp Holdings by ConAgra Foods.
St. Louis-based Ralcorp Holdings has agreed to be acquired in a deal valued by Omaha-based ConAgra Foods at $6.8 billion. The Ralston Foods plant at 601 16th St. NE employs 150 in the manufacture of private label cereal.
The landmark Cedar Rapids plant was known as National Oats until April 1994, when it became part of Ralston Foods. It produces oatmeal — instant and regular — sold under store brands, such as Hy-Vee, Publix and Safeway.
ConAgra Foods will pay Ralcorp Holdings shareholders $90 a share in cash, a 28% premium over Monday’s closing price. Including the assumption of debt. Shares of Ralcorp Holdings jumped 27 percent to $88.93 in premarket trading Tuesday.
The combined company will have sales of about $18 billion annually and more than 36,000 employees. It also will make ConAgra Foods the largest private label packaged food business in North America with $4.5 billion in annual sales.
The deal is expected to close by the end of March. A spokesman for Ralcorp Holdings said a team will look at how the two companies will combine operations, but he noted that there is very little overlap between the food makers.
Ralcorp Holdings’ private label products include cereal, pasta, crackers, jellies and jams, syrups and frozen waffles.
ConAgra Foods Chief Executive Gary Rodkin said the purchase of Ralcorp Holdings will give his company a much larger presence in the attractive and growing private label segment as well as accelerate its growth strategy.
“The transaction will allow us to apply our scale and combined operational expertise to this important growth area, and will strengthen our position as one of the leading food companies in North America,” Rodkin said. “Clearly, consumer dynamics have changed since the recession and we expect growth in private label food to continue to outpace growth in branded food.”
ConAgra Foods’ “Recipe for Growth” strategy, launched 18 months ago, includes expanding into the private label foods segment, growth in its core business, and expansion internationally.
ConAgra Foods, which already has an existing private label business of about $950 million, owns JM Swank in North Liberty, a food ingredient supplier. The Omaha company also operates a pudding manufacturing plant in Waterloo and a frozen meal assembly plant in Council Bluffs.
ConAgra Foods previously attempted to buy Ralcorp Holdings in September 2011 for $5.2 billion, but failed to acquire the St. Louis company.
Ralcorp Holdings made itself more attractive by spinning off its Post Holdings cereal business in February and agreed in September to sell its remaining 20 percent stake in the cereal maker to eliminate about $200 million of outstanding debt.
ConAgra Foods said it expects the purchase of Ralcorp Holdings to have only a “modest benefit” on next fiscal year’s results. It expects to achieve about $225 million of annual cost savings by the fourth full fiscal year after the merger is completed.