Dallas, Texas 07/29/2015 (Financialstrend) – ConAgra Foods Inc (NYSE:CAG) is locked up in talks with TreeHouse Foods Inc. (NYSE:THS) and Post Holdings Inc (NYSE:POST) as it continues to look for a buyer for its private label unit Ralcorp on sale. People familiar with the talks say ConAgra Foods is looking to fetch as much as $3.5 billion from the sale. Private equity firm Apollo Global Management LLC is also believed to have shown interest on the unit.
Cause of the Sale
Declining demand for processed foods as more people resort to healthy eating habits is seen as one of the reasons behind the sale. Pressure from activist investor Jana Partners is also believed to have played a key role in the push to offload the unit. ConAgra Foods Inc (NYSE:CAG) has already been forced to initiate a string of costs cuts as it tries to remain efficient in terms of expenses.
Ralcorp has been a disappointment facing consistent profit margin pressure ever since ConAgra Foods Inc (NYSE:CAG) acquired it for $5.1 billion in 2013. ConAgra Foods Inc (NYSE:CAG) opting to offload it for $3.5 billion just shows it may have lost hope of generating any value from it. The unit makes private level cereal pasta jams among other products.
TreeHouse and Post Acquisition Prospects
TreeHouse Foods Inc. (NYSE:THS) and Post Holdings Inc (NYSE:POST) have remained active on the acquisition front. Something that ConAgra Foods hopes comes into play as it looks for a quick buyer. The maker of Chef Boyardee canned products has already sought advice from Centerview Partners and Goldman Sachs as it tries to unlock as much value from the sale.
TreeHouse Foods Inc. (NYSE:THS) has already completed the acquisition of Flagstone Foods for $860 million. The company also says it has about $400 million in ‘dry powder’ as well as the ability to tap into the capital market whenever it needs cash to pursue any acquisition. Post Holdings Inc (NYSE:POST), on the other hand, is fresh from inking a $2.5 billion deal for Michael Foods having also paid $1.15 billion for MOM Brands.