If you can’t beat them, acquire them

Branded food supplier ConAgra’s acquisition of private label rival Ralcorp promises to create an interesting new dynamic when it comes to trading partner relationships.

Earlier this week, the companies announced they had reached an agreement valued at $6.8 billion whereby ConAgra will acquire Ralcorp for $90 a share to create one of the nation’s largest food companies with annual sales of roughly $18 billion.

"We are very pleased to have reached an agreement with Ralcorp after a period of collaborative dialogue between the two companies," said ConAgra Foods CEO Gary Rodkin. "Ralcorp is already the largest private label food company in the U.S. and is well positioned for future growth. The acquisition of Ralcorp is a logical and exciting step for ConAgra Foods. Adding Ralcorp provides us with a much larger presence in the attractive and growing private label segment and accelerates our ‘Recipe for 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."

The deal also promises to change the nature of conversations ConAgra has with some of its trading partners who, to varying degrees, rely on the prospect of private label competition as a negotiating strategy with brand suppliers. ConAgra was already generating private label sales of $950 million, but the deal makes the company the nation’s largest supplier of private label food with annual sales of $4.5 billion.

"We believe the balanced combination of our very significant branded food business, the largest private label food business in North America, and our important commercial food businesses, will enable ConAgra Foods to deliver even greater value and innovation to our customers and consumers, and sustainable profitable growth to our shareholders," Rodkin said.

"We believe the two companies are a great fit, and our employees will benefit as part of a larger diversified organization with the necessary scale and resources to be a leader in today’s rapidly evolving marketplace," said Kevin Hunt, Ralcorp’s president and CEO.

Ralcorp said the deal aligns with its 18 month old Recipe for Growth strategy which includes expansion in the private label segment, growth in its core business and adjacencies, and expansion internationally.

Ralcorp’s private label offerings include categories such as cereal, pasta, crackers, jellies and jams, syrups, frozen waffles and more. ConAgra is best known for brands such as Banquet, Chef Boyardee, Egg Beaters, Healthy Choice, Hebrew National, Hunt's, Marie Callender's, Orville Redenbacher's, PAM, Peter Pan, Reddi-wip, Slim Jim and Snack Pack.