Ralcorp shares up after buying Kraft's Post brand; Nike shares down; Barclays stock falls on write-downs

By Sheri Kasprzak

New York, Nov. 15 - Kraft Foods Inc. agreed to sell to Ralcorp Holdings, Inc. its Post cereals brand, the food industry giant said Thursday in a move that sent shares of Ralcorp up.

The all-stock deal is valued at $2.6 billion, and traders said the purchase is a good opportunity for Ralcorp.

"You've got a big, name brand, and that's going to be very profitable for them [Ralcorp]," said one sellside trader. "Of course it's good news for RAH."

An analyst said it could be good news for Ralcorp, assuming they can actually make it work.

"They're probably very good at doing private label products," said the analyst. "It remains to be seen if they can develop already-existing brands. If they're successful at it, it can mean good things for them. I'm skeptical though."

Ralcorp co-chief executive officer David Skarie called the deal a "transforming event" for Ralcorp.

The $2.6 billion price tag includes the issuance and assumption of debt, a statement from both companies noted Thursday.

Ralcorp, based in St. Louis, is a distributor of private-label cereals and frozen bakery products.

In other news related to sell-offs, Nike, Inc. is planning on selling its Starter brand to Iconix Brand Group, Inc. in a $60 million cash transaction.

The move comes almost three years after the company said it wanted to sell the Starter name following a strategic review.

Elsewhere, Barclays Bank plc said it expects to take £1.3 billion in write-downs.

"It just keeps on coming," said one trader. "Look for more. I see more write-downs coming for the rest of this year, into next year. This is not an issue that's going to get cleaned up overnight."

Barclays took a £500 million write-down in the quarter ended Sept. 30 and an £800 million write-down in October.

Shares of Barclays were off 2.50p to end at 530.50p (London: BARF).

Ralcorp to merge with Post brand

Moving back to the specifics of Kraft Foods' sale of the Post brand to Ralcorp, Kraft will distribute ownership of Post and other related assets to Kraft shareholders in either a splitoff or a spinoff transaction. A splitoff would provide Kraft shareholders with the option of electing to exchange Kraft shares for stock in the new Ralcorp. A spinoff would involve pro rata distribution of Kraft shares to shareholders, according to a statement from Kraft.

Either way, once the ink is dried on the deal, current Kraft shareholders will own 54% of the new Ralcorp and current Ralcorp shareholders will hold 46% of the combined company.

The deal is set to close in mid-2008. Once the transition is complete, the expanded Ralcorp will include the Post cereal manufacturing plants in Battle Creek, Mich.; Jonesboro, Ark.; Modesto, Calif.; and Niagara Falls, Ont.

Shares of Ralcorp gained 10.4%, or $5.77, to close at $61.24 (NYSE: RAH). Meanwhile, Kraft's stock fell by 61 cents, or 1.85%, to end at $32.37 (NYSE: KFT). After the market closed, the stock gained 17 cents.

"This is a transforming event for Ralcorp," said Skarie, in a statement.

"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. Ralcorp has substantial experience integrating acquisitions, having made 20 acquisitions in the past 10 years, which increased annual sales by over $1 billion. We plan to utilize this same experience to facilitate the successful integration of Post."

Nike to sell Starter brand

In Nike's sale of its Starter brand to Iconix Brand Group, Nike plans to sell the brand for $60 million in cash.

Shares of Nike closed down 17 cents to end at $63.05 (NYSE: NKE). The stock gained 5 cents in after-hours trading.

"We're pleased to have found a buyer committed to investing in and growing the Starter brand," said Nike CEO Mark Parker in a statement.

"Under Nike's ownership, Starter has significantly strengthened its brand and product design and development capabilities. It is a difficult decision to divest any business, but we have found the right buyer and this is the right choice for Nike. Iconix is a well-respected brand builder and manager."

The transaction is set to close in December.

The decision to divest the Starter name, a statement from Nike on Thursday said, came in 2004 after a strategic review.

Starter makes league-licensed apparel.

Technisource to merge with Spherion

In other merger news, Spherion Corp. intends to buy Technisource, Inc. in a $140 million transaction.

The stock gained 2.51%, or 19 cents, to end at $7.75 (NYSE: SFN).

The deal will create one of North America's largest information technology staffing and services companies, a statement from Technisource said Thursday.

"Both companies bring unique strengths to this merger," said Stephen Bova, CEO of Technisource, in a statement.

"While Technisource will be able to leverage its practice-based specialty staffing and service offerings across a much larger customer base, undoubtedly the greatest benefit comes from combining the very talented employees who also share similar core values."

"We are excited about adding this strong and successful brand to Spherion," said Roy Krause, Spherion's CEO, in a news release.

"The company is an excellent strategic fit for us. When we combine our existing IT staffing business with Technisource, we will be a very significant provider of IT staffing services in North America."

Technisource, based in Little Rock, Ark., is a private company.

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