Friday, December 30, 2011

Ralcorp then and now

In 2007, when Ralcorp acquired the Post cereal business from Kraft this is what they said:

The transaction will benefit the new Ralcorp in several important ways:

  • Creates a larger, stronger business with a portfolio of businesses balanced between branded, private-label and frozen bakery food products;
  • Increases 2007 sales by 50% to $3.3 billion a year from $2.2 billion, with Post cereals accounting for approximately 32% of total annual sales;
  • Enhances Food EBITDA margins by at least 500 basis points from 10.9% to 16.0% - 16.6%, resulting in pro forma combined 2007 Food EBITDA between $533 million and $553 million, an increase of approximately 120% to 128% over Ralcorp's reported results;
  • Increases earnings per share by $0.44 to $0.68 for pro forma fiscal 2008 as if the combination had been completed as of the beginning the fiscal year and before one-time costs associated with the transaction; and
  • Maintains a conservative leverage profile and generates substantial incremental free cash flow to fund investments, acquisitions and share repurchases.

"This is a transforming event for Ralcorp. The addition of Post cereals gives Ralcorp a truly distinctive line of branded cereal products plus a branded infrastructure and platform that we can build on through organic growth and acquisitions," said David P. Skarie, co-chief executive officer and president, Ralcorp Holdings, Inc., who oversees the company's Ralston Foods cereals and snacks and Carriage House businesses and who will be responsible for Post after the transaction is closed. Skarie added, "Ralcorp has substantial experience integrating acquisitions, having made 20 acquisitions in the past 10 years which increased annual sales by over $1.0 billion. We plan to utilize this same experience to facilitate the successful integration of Post. This transaction represents the next logical step in Ralcorp's history of growing sales and profits. Since 2001, Ralcorp's sales and Food EBITDA have increased an average of 11 and 14 percent per year, respectively."

Kevin J. Hunt, Ralcorp's co-chief executive officer and president who manages the Bremner, Nutcracker and frozen bakery businesses further added, "We have an established track record of growing platforms in the food business through acquisition and integration of other food companies. This merger will allow us to continue that growth strategy in a new branded platform as we continue to grow our existing private-label and frozen bakery platforms. The new company will have a strong balance sheet that will allow us to continue to make acquisitions and will allow for opportunistic share repurchases."

"Ralcorp is committed to achieving long-term growth and success with Post. We are confident that with Ralcorp's resources and support, our team will help this important branded business excel in the marketplace," said Skarie.

"The team will focus on the Post cereal brands and it will include Post's existing marketing and sales support team, which will continue to be headquartered in New Jersey, and its existing R&D team, which will continue to be located in Battle Creek, Michigan," Skarie added. "They will build a nationwide sales management and broker network devoted to the Post brands. In addition, the combination of Post's and Ralcorp's operations, purchasing and logistics networks will ensure a smooth transition and realizations of efficiencies."
Now, only 4 years later, this is what they have to say as they spinn-off Post:
Under the plan announced on July 14, 2011, Ralcorp intends to execute a tax-free spin-off of the Post cereal business to Ralcorp shareholders. Upon completion of the transaction, Ralcorp will continue to be the leading producer of private-brand foods and a major producer of foodservice products, and Post will be the third largest seller of ready-to-eat cereals in the U.S. Both companies are expected to benefit by operating as pure-play independent public companies with distinct financial profiles, capital structures appropriate for their respective businesses and their own equity currencies. Ralcorp will continue to trade on the New York Stock Exchange. Post has received approval for listing on the New York Stock Exchange, subject to completion of the separation.