Ralcorp Holdings is less than two months away from completing the spin-off of its national brand cereal business, Post Holdings, yet company officials say they remain in buy mode.
In a conference call with analysts yesterday, St. Louis-based Ralcorp’s executives said the spin-off of Post as a separate, publicly traded company will occur by the end of January 2012. Ralcorp plans to focus on Private Brand cereal, pasta, frozen bakery goods and other foods.
“As the leader in private brand foods, we continue to be excited about the opportunities that exist in the private brand, or store-brand market,” Kevin Hunt, Ralcorp’s co-chief executive and president said in the call.
Ralcorp completed its acquisition of Kansas City-based American Italian Pasta Co. for $1.2 billion in July 2010, which helped boost Ralcorp’s net sales to $4.7 billion in fiscal 2011, up from $4 billion in 2010.
In October, Ralcorp closed on its $545 million purchase of the North American refrigerated dough business from Sara Lee, which included Sara Lee’s Private Brand biscuits, crescent rolls, pizza and pie crusts and toaster pastries.
More acquisitions may be on the horizon. “When we look at the current acquisition pipeline, we’ve identified approximately $10 billion in additional annual sales representing 50 individual companies that meet our initial criteria for strategic acquisition, ranked by margins and synergies with our existing business,” Hunt said in the call.
Morningstar analyst Erin Lash wrote in a research note that Ralcorp faces competitive pressures in the Private Brand cereal business, however. “Branded firms like General Mills and Kellogg are prioritizing investments behind product innovation and marketing that resonate with consumers, which could further pressure Ralcorp’s cereal sales, in our view,” Lash wrote.
Source: St Louis Post Dispatch