Ralcorp to buy American Italian Pasta for $1.2 billion; financing structure still being determined

By Jennifer Lanning Drey

Portland, Ore., June 21 - Ralcorp Holdings, Inc. has entered into a definitive merger agreement with American Italian Pasta Co. under which it will acquire all outstanding shares of AIPC common stock for a total purchase price of $1.2 billion, net of cash acquired, Ralcorp announced Monday.

Ralcorp plans to finance the transaction using a combination of cash on hand, borrowings under existing facilities, a bridge facility for which it has already received a commitment letter or other debt or equity arrangements, Kevin Hunt, co-chief executive officer of Ralcorp, said during a company conference call held Monday.

"We still have not established a permanent financing structure. At this point, we're still evaluating some options, and that does involve some conversations with the ratings agencies," Hunt added during the question-and-answer portion of the call.

The company's discussions with the ratings agencies will be one of the factors driving Ralcorp's decision on the permanent financing structure, he said.

Ralcorp also announced Monday that it has acquired two Canadian specialty cracker companies. The terms of the transactions were not disclosed.

On a pro forma basis for the transactions, Ralcorp expects its leverage to be in the range of 3.0 times to 3.2 times.

AIPC acquisition benefits

Regarding its merger agreement with AIPC, Hunt said he believes adding AIPC's portfolio of brands while building Ralcorp's existing private-label platform and customer base will allow Ralcorp to better address a broader spectrum of customers.

"Not only is AIPC experiencing growth, but its branded products have achieved consistent margin expansion, which we believe makes the business an attractive financial opportunity as part of our portfolio of businesses," he said.

Ralcorp plans to commence a tender offer in the coming days to acquire the AIPC stock, Hunt said.

The company expects the transaction to close during its fourth quarter ending Sept. 30.

Upon completion, AIPC will operate as an independent division of Ralcorp.

AIPC is a Kansas City, Mo., producer of dry pasta.

Specialty cracker acquisitions

In addition to its plans to acquire AIPC, Ralcorp also announced Monday that it has acquired North American Baking Ltd. and J.T. Bakeries Inc. in two additional transactions.

North American Baking, formerly known as PL Foods Ltd., has annual net sales of approximately $56.7 million.

J.T. Bakeries has annual net sales of approximately $38.5 million.

"[Specialty crackers] is an attractive segment that we already know well and in which we see prospects for continued growth and profitability," Hunt said during the call.

Both transactions were completed on May 31.

Ralcorp expects the transactions will be slightly accretive during the remainder of its 2010 fiscal year.

St. Louis-based Ralcorp makes cereal and private-label food products through its subsidiaries.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.