conagra presses $5.2 billion bid for ralcorp.pdf

7/27/2019 ConAgra Presses $5.2 Billion Bid for Ralcorp.pdf

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November 27, 2012, 3:16 pm

ConAgras Chief Emphasizes Lure of Private-Label

Brands

ByMICHAEL J. DE LA MERCED

Nati Harnik/Associated PressConAgras chief, Gary Rodkin.

It may have taken a year and a corporate spinoff, butConAgrahas succeeded in buyingRalcorp,forabout $5 billion.

And it couldnt have come soon enough for ConAgras chief executive, Gary Rodkin, who seesRalcorps strength in selling food under various customers brands as an important part of hisown companys future.

The deal comes more than a year after ConAgra walked away from a $5.2 billion offer forRalcorp, which had repeatedly insisted on remaining independent and divesting its Post cerealsdivision as a better way of generating returns for its shareholders. Even though he is nowtechnically paying more for Ralcorp, which spun off Post in February, Mr. Rodkin argued thatthe strategic rationale for buying the company remained in place.

Then was then and now was now, he told DealBook in a telephone interview on Tuesday. Thedeal was very attractive for us now.

Behind the deal was a desire to expand ConAgras existing private labels business, whichgenerates about $950 million in annual sales. The combined company will have an estimated$4.5 billion in annual revenue from generic brands, which are resold by customers like TraderJoes andCostcounder their own brands.

In fact, Mr. Rodkin said, such companies are the fastest-growing retailers in the food space and are focused on a strategy built on selling proprietary brands.
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At the same time, Ralcorp can benefit from the bigger presence that ConAgra has with retailersand its more powerful sales channels. Mr. Rodkin estimates that the combined company willhave about $225 million in cost savings, and that the deal will begin adding to its earnings pershare in its 2013 fiscal year.

This is something that makes so much sense, he said. Within our own management team andour own board, it just seemed so compelling, from both a strategic and financial perspective.

For now, ConAgra will focus on reducing the debt that it will take on through the transaction.Its an important goal, and Mr. Rodkin emphasized that his company would retain its investment-grade credit rating.

But after perhaps two years, ConAgra will again look to deal-making to bolster its businesses. Ithad already struck a number of deals between last years withdrawn offer for Ralcorp andTuesdays announcement, and Mr. Rodkin said ConAgra had integrated them well.

In the future, he added, the company will look for potential acquisitions whose value comes fromincreasing sales, instead of merely adding to ConAgras profit through the promise of costsavings.

Were looking for things that have tailwinds for the long term, he said.


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November 27, 2012, 7:34 am

ConAgra Foods to Buy Ralcorp, Solidifying Market

Share

ByMICHAEL J. DE LA MERCEDandSTEPHANIE STROM

Paul Sakuma/Associated PressRalcorp owns several brands,including the American Italian Pasta Company.

8:35 p.m. | Updated

For ConAgra Foods, buying Ralcorp Holdings may have taken more than a year, but it wasworth the wait.

By buying Ralcorp for about $5 billion in cash, ConAgra will become the largest producer ofprivate-label packaged food in North America.

ConAgra has established itself with consumer foods populating many household pantries likeOrville Redenbachers and Chef Boyardee. Now, it is betting that private -label goods madefor bakeries, grocery chains and other customerswill be a higher source of growth worldwide.

Together, the two companies would have combined private-label sales of $4.5 billion.

Once regarded as the stepchildren of the food aisles, private-label products have become brandsin their own right as grocery store retailers have used them to set themselves apart fromcompetitors. Such lines include Artisan Fresh at Sams Club, Simple Truth at Kroger andCulinary Circle in SuperValus chains, which features such items as broccoli and yellowCheddar soup and raspberry chipotle meatballs.

Over the years, retailers invested heavily in improving the quality of their food products as wellas the packaging and merchandising. Now, they have become ubiquitous among conveniencestores, club stores, big-box retailers and specialty grocers like Whole Foods.

That is one reason ConAgra was willing to make another effort to buy Ralcorp evenafter it wasrejected last yearin its $5.2 billion takeover bid. Ralcorp was then focused on a plan to spin off
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its Post cereals division, which markets brands like Honey Bunches of Oats, Post Raisin Branand Grape-Nuts.

That divestiture was completed in February. Shares in the new company, Post Holdings, haverisen 28 percent since they began trading.

This year, Ralcorp had also given a board seat to Keith Meister, a longtime lieutenant to theactivist investor Carl C. Icahn who had called upon the company to consider selling itself.

Several weeks ago, ConAgra approached Ralcorp about another deal, and effectively raised itsoffer for the business that remained.

This is something that makes so much sense, Gary Rodkin, ConAgras chief executive, said by

telephone on Tuesday. Within our own management team and our own board, it just seemed socompelling, from both a strategic and financial perspective.

Investors in his company appear to agree. Shares in ConAgra jumped 4.7 percent on Tuesday, to$29.63, while those in Ralcorp surged 26.4 percent, to $88.80.

When the economy was weaker, consumers snapped up private-label brands, although a newreport out on Tuesday from the SymphonyIRI Group, a market research firm, suggests that thegrowth of private labels might be slowing.

The study found that the private-label unit share of the total consumer packaged goods market

fell to 17.1 percent in the 52 weeks ended Sept. 9 from 17.3 percent in the period a year earlier,although the dollar value of those products continued to inch ahead.

Over the past two years, the trend of buying more private-label brands has been flattening out,with dollar sales ticking up more slowly and unit sales declining slightly, said Susan H. Viamari,editor of SymphonyIRIs Times and Trends reports. Consumers are still frugal, but becausenational brands have stepped up their game, theyre gaining back some share they lost to privatelabel.
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Still, retailers are continuing to make investments in developing private labels.

Private-label brands really have become true brands, Ms. Viamari said. There was a timewhen they were knockoffs you would bury in the bottom of your cart, but now in many casesthey are just as good or even better than national brands and represent a smart purchase.

There is an argument, however, that companies that offer both branded and private-labelproducts risk cannibalizing their brands or muddying their relationships with their customers.That may not be a danger for ConAgra because its brands do not emphasize its corporate parent,thus giving them sufficient distance to stand on their own.

Its a challenge to manage a product portfolio that is broader but more complex, but there arealso opportunities because you can forge more and different relationships with retailers, saidDavid Garfield, who leads the consumer products practice at AlixPartners, a consulting firm.

ConAgras own private-label business has about $950 million in annual sales. But combined

with Ralcorp, the unit could amount to about a quarter of the companys sales, said Jack Russo, astock analyst with Edward Jones.

Since retailers are interested in dealing with top brands, not second- and third-rate brands, thisis a move that should jump-start their growth rate because they now will have something else tosell that retailers want, he said.

The deal is by far the largest the acquisitive ConAgra has struck in its history, according toStandard & Poors Capital IQ. It is more than triple the size of the companys $1.6 billiontakeover of International Home Foods, made in 2000.

Mr. Rodkin said that the benefits far outweighed the costs. He estimates that the combinedcompany will have about $225 million in cost savings, and that the deal will begin adding to itsearnings per share in its 2013 fiscal year.

ConAgra expects to pay for the deal with existing cash, bank facilities and new debt. It plans toissue up to $350 million in new shares to help maintain its existing investment-grade creditrating.


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August 14, 2011, 3:01 pm

ConAgra Presses $5.2 Billion Bid for Ralcorp

ByMICHAEL J. DE LA MERCED

ConAgraconfirmed on Sundaythat it had offered nearly $5.2 billion forRalcorpHoldings, daysafter Ralcorprejected the bid.

ConAgra also disclosed the letterit sent to Ralcorp last Thursday containing the new proposal,which hinted that it might become more aggressive if still rebuffed.

Without your constructive engagement, be assured that this is our last private letter to you,wrote Gary M. Rodkin, ConAgras chief executive.

ConAgras latest bid, its third, is worth $94 a share in cash. That is 19 percent above Ralcorpsclosing share price on Friday and above the companys 52-week high of $91.35.

In its notice of rejection on Friday, Ralcorp again pointed to its planned spinoff of Post Cerealsto its shareholders as a way to generate more value. It purchased the business fromKraft Foodsin 2007 for about $1.65 billion.

But ConAgra argued in its letter that the plan was risky and would take time. The smallerRalcorp would lack enough scale to handle rising prices for ingredients, Mr. Rodkin wrote, whilePost would be competing against bigger rivals with a more indebted balance sheet.

ConAgra has sought to bulk up its generic food offerings to help cope with rising commodity

prices. Combining with Ralcorp would create a company with $4 billion in private-label sales, orroughly a quarter of revenue.

But it is unclear what steps ConAgra could take if it goes hostile. Ralcorp already has severaltakeover defenses, including a poison pill that would make an unwanted takeover prohibitivelyexpensive and a staggered board in which only a few directors are elected each year.

Ralcorp is also incorporated in Missouri, whose takeover rules are daunting for hostile bidders.More than two-thirds of a companys shareholders must approve a takeover, a higher standardthan the majority required by Delaware law.

August 11, 2011

The Board of Directors Ralcorp Holdings Inc.

800 Market Street, Suite 2900

Saint Louis, MO 63101
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Attn: Mr. William P. Stiritz, Chairman of the Board

Dear Bill:

As you are aware, we have tried to engage with you regarding a potential combination between

Ralcorp and ConAgra Foods on numerous occasions since February, including most recentlyreaching out to your financial advisors in late July. Our management team and Board weredisappointed that even our latest outreach, which informed you of our intention to present youwith a revised, increased proposal if we were to meet, was rejected without a meeting. Webelieve your shareholders would be disappointed as well.

In our latest outreach to your advisors, we made it clear that it was our preference to engage in aprivate in-person conversation to share the terms of our increased proposal. Unfortunately, asyou have been unwilling to allow us a hearing, we are compelled to present our revised proposalby way of this letter. Without your constructive engagement, be assured that this is our lastprivate letter to you.

Based on the strategic, operational and financial merits of a combination, we are increasing ouroffer to $94.00 per share in cash. This compares to Ralcorps current price of approximately $78as of the date of this letter, which already incorporates the announcement of your separation planand which is benefitting from our most recent public offer. It also represents an increase ofnearly 10% vs. our prior proposal of $86 per share despite the fact that the S&P 500 has declined14% since May 3, 2011, the last business day prior to our previous letter. This increased proposalrepresents:

a 44% premium to Ralcorps closing price on March 21, 2011, the last business day prior toour initial letter;

a 37% premium to Ralcorps one-month average closing price as of April 28, 2011, the dayprior to press speculation on our proposal; and

a 32% premium to Ralcorps closing share price on April 28, 2011, the day prior to pressspeculation, which was also the stocks 52-week closing high as of that date.

You have consistently messaged to us the unwillingness of your Board to sell Ralcorp and thatyour position is focused on maintaining independence. You have been equally clear that you donot want to discuss price with us. However, we believe this proposal is highly attractive toRalcorps shareholders and represents superior value compared to any alternatives you couldpursue, including your recently announced plan to split apart the company. Our proposal presentscompelling, certain and upfront value; in comparison, your announced spin-off plan is not

expected to deliver comparable value, will take at least four to six months time and posessignificant post-transaction value risk. We are confident that your shareholders would want us tobe engaged in collaborative negotiations in response to this proposal.

We believe that our proposal, which represents a full and fair price that reflects the long-termstrategic value of a combination, is particularly attractive relative to the standalone prospects ofRalcorps businesses should you proceed with your proposed separation. As a smallerindependent entity, Ralcorps private label business will be more susceptible to the margin


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pressures from commodity cost volatility noted in Ralcorps latest earnings release. In addition,an independent Post Foods will face the uncertainty of operating as a highly leveraged companyin the competitive cereal category without the benefit of a broader portfolio. In contrast to theuncertainty for your shareholders in a spin-off scenario, the compelling, certain value containedin our proposal to your shareholders reflects the strength of our combined businesses and the

benefit of synergies we expect to achieve. The immediate, attractive premium we are offering toyour shareholders is supported by the fact that, as part of our broader portfolio, both Ralcorpprivate label and Post would be better positioned to drive performance and would enjoy theresources of a larger enterprise necessary to make the required investments to enhance thebusiness for the long-term.

Accordingly, we urge you to reconsider your position and again request that you permit us tobegin a conversation and due diligence with Ralcorps senior management. As we haveconsistently stated, we and our team of advisors remain prepared to engage with you at theearliest time possible. It is our expectation that we could conduct due diligence and finalize theterms of a transaction on an expedited basis.

This non-binding proposal is conditioned upon (i) satisfactory completion of due diligence, (ii)approval by our Board of Directors of the final terms and conditions of the potential transaction,and (iii) execution and delivery of mutually acceptable definitive documentation, and satisfactionof the closing conditions set forth therein. This letter is an expression of intent only, and shall notgive rise to any binding obligations.

Once again, we firmly believe that our proposal, which reflects the long-term benefits of acombination of our companies, represents the most attractive opportunity for your shareholdersand would be welcomed by them. We continue to hold in high regard the company that you andyour team have built, and we urge you to appreciate the value contained in our increased

proposal. We strongly encourage you to consider this proposal as expeditiously as possible. Inthe interim, we look forward to our advisors speaking in the coming few days.We look forward to your response and to working together toward a successful and mutuallybeneficial transaction for both companies shareholders.

Sincerely,Gary M. RodkinChief Executive Officer


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ConAgra Foods to Acquire Ralcorp, the Largest Private Label Food Manufacturer in the

U.S., for $90 Per Share in Cash

Creates one of the largest North American packaged food companies and the largestNorth American private label packaged food business

Accelerates ConAgra Foods Recipe for Growth strategy and further leverages itscapabilities

Expected to be accretive to EPS in Year 1, strengthen ConAgra Foods top-line and EPSgrowth potential over the long term, and provide significant annual cost synergies

OMAHA, Neb. & ST. LOUIS, Mo.--(BUSINESS WIRE)--Nov. 27, 2012-- ConAgra Foods, Inc.(NYSE: CAG) and Ralcorp Holdings, Inc. (NYSE: RAH) today announced that the boards ofdirectors of both companies have unanimously approved a definitive agreement under whichConAgra Foods will acquire Ralcorp, the largest manufacturer of private label food in the U.S.

Under the terms of the agreement, Ralcorp shareholders will receive $90.00 per share in cash foreach outstanding share of common stock held, representing a 28.2% premium to the closing priceof Ralcorps common stock on November 26, 2012, and a 24.9% premium to the average closingprice of Ralcorps common stock for the 30 trading days ending November 26, 2012. Thetransaction is valued at approximately $6.8 billion, including the assumption of debt.

This transaction creates one of the largest packaged food companies in North America, withsales of approximately $18 billion annually and more than 36,000 employees. It will alsoposition ConAgra Foods as the largest private label packaged food business in North America,with combined private label sales of approximately $4.5 billion.

Gary Rodkin, chief executive officer of ConAgra Foods said, We are very pleased to havereached an agreement with Ralcorp after a period of collaborative dialogue between the twocompanies. Ralcorp is already the largest private label food company in the U.S. and is wellpositioned for future growth. The acquisition of Ralcorp is a logical and exciting step forConAgra Foods. Adding Ralcorp provides us with a much larger presence in the attractive andgrowing private label segment and accelerates our Recipe for Growth strategy. The transactionwill allow us to apply our scale and combined operational expertise to this important growtharea, and will strengthen our position as one of the leading food companies in North America.We believe the balanced combination of our very significant branded food business, the largestprivate label food business in North America, and our important commercial food businesses,will enable ConAgra Foods to deliver even greater value and innovation to our customers and

consumers, and sustainable profitable growth to our shareholders. We look forward to workingwith Ralcorps experienced and talented team to capitalize on opportunities and create value forshareholders, and to welcoming Ralcorps employees to the ConAgra Foods family.

Kevin J. Hunt, chief executive officer and president of Ralcorp, said, We are proud of Ralcorpstrack record of shareholder value creation and view this transaction as the culmination of thoseefforts. This combination delivers immediate and compelling cash value to our shareholders andbenefits to our customers and employees. We believe the two companies are a great fit, and our
http://www.conagrafoods.com/


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employees will benefit as part of a larger diversified organization with the necessary scale andresources to be a leader in todays rapidly evolving marketplace. On behalf of the Ralcorp Boardand management team, we thank our dedicated employees for their continued hard work, whichhas enabled us to grow Ralcorp to a position of strength with our many private label offeringsacross both retail and commercial channels. We look forward to joining with ConAgra Foods to

complete this exciting transaction and capitalize on our future growth opportunities.

Strong Strategic Rationale

The acquisition of Ralcorp adds to ConAgra Foods existing private label business ofapproximately $950 million to create the largest private label packaged food business in NorthAmerica, with approximately $4.5 billion in combined annual private label sales. Ralcorp fitswell with ConAgra Foods Recipe for Growth strategy, set 18 months ago, which includesexpansion in the private label segment, growth in its core business and adjacencies, andexpansion internationally. According to industry analysts, private label now represents 18% ofsales in the packaged food market in the U.S. and has consistently demonstrated growth in

excess of the overall food market over time. ConAgra Foods combination with Ralcorp createsan enhanced platform that will allow ConAgra Foods to capitalize on, and contribute to, thatcompelling long-term growth trend while generating significant efficiencies.

Ralcorp has strengthened its leadership position in private label through recent strategicacquisitions and enhanced customer relationships. The two companies portfolios are acomplementary fit, with very little overlap in terms of offerings. Ralcorps leading private labelofferings include cereal, pasta, crackers, jellies and jams, syrups, frozen waffles, and more.Ralcorps total annual sales of approximately $4.3 billion also include a branded and commercial/ foodservice portfolio.

The combined company will have significant operating capabilities across its branded, privatelabel and commercial / foodservice businesses, including:

A robust Sales and Marketing function that drives top-line growth A strong Research, Quality and Innovation platform A management team with deep industry experience and strong talent across the

organization A core understanding of delivering value to the customer and consumer A consumer and shopper insights-driven focus Procurement and risk management expertise Well-developed productivity capabilities and experience with complex supply chains

With Ralcorp, ConAgra Foods will have a balanced portfolio with a stronger growth profile. Thetransaction is also expected to increase ConAgra Foods importance to customers andconsumers, with product offerings across a wide range of price points, segments and channels.The enhanced breadth and depth of the combined portfolio is expected to allow ConAgra Foodsto build deeper customer relationships and drive additional category growth.

Gary Rodkin, chief executive officer of ConAgra Foods, added, Clearly, consumer dynam ics


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have changed since the recession and we expect growth in private label food to continue tooutpace growth in branded food. At the same time, we remain very proud of and fully committedto our brands, which will remain the largest part of our business and are found in 97% oAmericas households. We believe our combination of branded, private label and commercialofferings, supported by leading functional capabilities, represents a unique and balanced

approach that allows us to address the full range of customer and consumer requirements andadapt to the changing demands of the food industry.

Compelling Financial Benefits

ConAgra Foods expects the transaction to provide attractive sales and EPS growth over time.Because this transaction is expected to close by March 31, 2013, management expects it to havea modest benefit on fiscal 2013 financial results and will quantify that benefit in the comingmonths. Excluding any benefit from this transaction, ConAgra Foods expectations for fiscal2013 fully diluted EPS remain unchanged at $2.03 to $2.06, adjusted for items impactingcomparability. ConAgra Foods will provide additional details regarding the favorable impact of

this transaction on its financial outlook for fiscal years 2013 and 2014, as well as its favorableimpact on the companys long-term financial algorithm, in due course as integration plans, thepace of expected synergies, and the financing components of the transaction are finalized.

ConAgra Foods intends to use its strong infrastructure and productivity capabilities to drivesignificant cost synergies from this transaction, primarily in the areas of supply chain andprocurement efficiencies. It expects to achieve approximately $225 million of cost synergies onan annual basis by the fourth full fiscal year after closing.

The acquisition of Ralcorp is expected to be financed primarily with cash on hand, existing creditfacilities and new borrowings, for which ConAgra Foods has received a commitment letter from

BofA Merrill Lynch.

ConAgra Foods is fully committed to its investment grade credit rating, and consistent with thatcommitment, expects to issue up to $350 million of equity. ConAgra Foods will prioritize rapiddeleveraging in the near term through its strong cash flow generation. The company currentlyexpects to maintain its dividend of $1.00 per share on an annual basis and will significantlyreduce its share buyback activities for a period of time. ConAgra Foods remains committed to itslong-term capital allocation priorities, including a top-tier dividend, strong balance sheet andstrong liquidity.

Integration

ConAgra Foods and Ralcorp will establish a transition team comprised of members of bothmanagement teams to prepare for and to oversee the integration of the businesses.

Terms and Conditions

The transaction is subject to the approval of Ralcorps shareholders and customary regulatory


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approvals. The transaction is expected to close by March 31, 2013.

Advisors

Centerview Partners and BofA Merrill Lynch are serving as financial advisors to ConAgra Foods

and Davis Polk & Wardwell LLP is serving as its legal advisor. Barclays and Goldman, Sachs &Co. are serving as Ralcorps financial advisors and Wachtell, Lipton, Rosen & Katz is serving asits legal advisor.

More information on the transaction can be found at www.conagrafoodstransaction.com.

Conference Call Details

ConAgra Foods will host a conference call at 8:30 am EST/7:30 am CST today to discuss theannouncement. Domestic and international participants may access the conference call toll-freeby dialing 1-888-312-3047 (US/Canada Toll Free) and 1-719-457-2606 (International Toll)

respectively, and using the passcode 1466942. This conference call, along with webcastpresentation materials, can also be accessed live on the companys Investor Relations website athttp://investor.conagrafoods.com. To access a replay of the conference call, please dial 1-888-203-1112 (US/Canada Toll Free) or 1-719-457-0820 (International Toll), passcode 1466942.

Ralcorp also issued a separate release today announcing its fourth quarter and full fiscal year2012 earnings results, which is available on the investor section of the companys website atwww.ralcorp.com.

About ConAgra Foods, Inc.

ConAgra Foods, Inc., (NYSE: CAG) is one of North America's leading food companies, withbrands in 97 percent of America's households. Consumers find Banquet, Chef Boyardee, EggBeaters, Healthy Choice, Hebrew National, Hunt's, Marie Callender's, OrvilleRedenbacher's, PAM, Peter Pan, Reddi-wip, Slim Jim, Snack Pack and many otherConAgra Foods brands in grocery, convenience, mass merchandise and club stores. ConAgraFoods also has a strong business-to-business presence, supplying frozen potato and sweet potatoproducts as well as other vegetable, spice and grain products to a variety of well-knownrestaurants, foodservice operators and commercial customers. For more information, please visitus at http://www.conagrafoods.com.

About Ralcorp Holdings, Inc.

Ralcorp produces a variety of privatebrand foods sold under the individual labels of variousgrocery, mass merchandise and drugstore retailers, and frozen bakery products sold to in-storebakeries, restaurants and other foodservice customers. Ralcorps diversified product mix

includes: readytoeat and hot cereals; nutritional and cereal bars; snack mixes, cornbased chipsand extruded corn snack products; crackers and cookies; snack nuts; chocolate candy; saladdressings; mayonnaise; peanut butter; jams and jellies; syrups; sauces; frozen griddle products

including pancakes, waffles, and French toast; frozen biscuits and other frozen prebaked
http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.conagrafoodstransaction.com&esheet=50489325&lan=en-US&anchor=www.conagrafoodstransaction.com&index=1&md5=bf577b1174cee50f7c4bb5eb8e752d6ahttp://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Finvestor.conagrafoods.com&esheet=50489325&lan=en-US&anchor=http%3A%2F%2Finvestor.conagrafoods.com&index=2&md5=45351dce036f32e1cc12c2f7b9b17499http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.ralcorp.com&esheet=50489325&lan=en-US&anchor=www.ralcorp.com&index=3&md5=414388d58dad721a1bae93be796614f6http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.conagrafoods.com&esheet=50489325&lan=en-US&anchor=http%3A%2F%2Fwww.conagrafoods.com&index=4&md5=84e8ad54a4a46b618e2b433034dae938http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.conagrafoods.com&esheet=50489325&lan=en-US&anchor=http%3A%2F%2Fwww.conagrafoods.com&index=4&md5=84e8ad54a4a46b618e2b433034dae938http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.ralcorp.com&esheet=50489325&lan=en-US&anchor=www.ralcorp.com&index=3&md5=414388d58dad721a1bae93be796614f6http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Finvestor.conagrafoods.com&esheet=50489325&lan=en-US&anchor=http%3A%2F%2Finvestor.conagrafoods.com&index=2&md5=45351dce036f32e1cc12c2f7b9b17499http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.conagrafoodstransaction.com&esheet=50489325&lan=en-US&anchor=www.conagrafoodstransaction.com&index=1&md5=bf577b1174cee50f7c4bb5eb8e752d6a


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products such as breads and muffins; frozen and refrigerated doughs; dry pasta; and frozen pastameals. For more information about Ralcorp, visit the Companys website atwww.ralcorp.com.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. These forward-looking statements are based onConAgra Foods current expectations and are subject to uncertainty and changes incircumstances. These forward-looking statements include, among others, statements regardingexpected synergies and benefits of a potential combination of ConAgra Foods and Ralcorp,expectations about future business plans, prospective performance and opportunities, regulatoryapprovals and the expected timing of the completion of the transaction. These forward-lookingstatements may be identified by the use of words such as expect, anticipate, believe,estimate, potential, should or similar words. There is no assurance that the potentialtransaction will be consummated, and there are a number of risks and uncertainties that couldcause actual results to differ materially from the forward-looking statements made herein. These

risks and uncertainties include the timing to consummate a potential transaction betweenConAgra Foods and Ralcorp; the ability and timing to obtain required regulatory approvals andsatisfy other closing conditions, including the approval of Ralcorps shareholders; ConAgraFoods ability to realize the synergies contemplated by a potential transaction; ConAgra Foodsability to promptly and effectively integrate the business of Ralcorp and ConAgra Foods; theavailability and prices of raw materials, including any negative effects caused by inflation andadverse weather conditions; the effectiveness of its product pricing, including any pricing actionsand promotional changes; future economic circumstances; industry conditions; ConAgra Foodsability to execute its operating and restructuring plans; the success of ConAgra Foodsinnovation, marketing, including increased marketing investments, and cost-saving initiatives;the competitive environment and related market conditions; operating efficiencies; the ultimate

impact of ConAgra Foods product recalls; access to capital; ConAgra Foods success ineffectively and efficiently integrating its acquisitions; actions of governments and regulatoryfactors affecting ConAgra Foods businesses, including the Patient Protection and AffordableCare Act; the amount and timing of repurchases of ConAgra Foods common stock, if any; andother risks and uncertainties discussed in ConAgra Foods filings with the SEC, including itsmost recent annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K.Investors and security holders are cautioned not to place undue reliance on these forward-lookingstatements, which speak only as of the date they are made. ConAgra Foods disclaims anyobligation to update or revise statements contained in this press release to reflect future events orcircumstances or otherwise.

Additional Information and Where to Find It

Ralcorp intends to file with the SEC a proxy statement in connection with the proposed merger.The definitive proxy statement will be sent or given to the shareholders of Ralcorp and willcontain important information about the proposed merger and related matters. RALCORPSECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLYWHEN IT BECOMES AVAILABLE. The proxy statement and other relevant materials (whenthey become available), and any other documents filed by Ralcorp with the SEC, may be
http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.ralcorp.com&esheet=50489325&lan=en-US&anchor=www.ralcorp.com&index=5&md5=d9611cabf135b97ab2c338ffa54f1380http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.ralcorp.com&esheet=50489325&lan=en-US&anchor=www.ralcorp.com&index=5&md5=d9611cabf135b97ab2c338ffa54f1380http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.ralcorp.com&esheet=50489325&lan=en-US&anchor=www.ralcorp.com&index=5&md5=d9611cabf135b97ab2c338ffa54f1380


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obtained free of charge at the SECs website, atwww.sec.gov. In addition, security holders willbe able to obtain free copies of the proxy statement from Ralcorp by contacting InvestorRelations by mail at Attention: Investor Relations, 800 Market Street, St. Louis, Missouri 63101.

Participants in the Solicitation

Ralcorp and its directors and executive officers may be deemed to be participants in thesolicitation of proxies from Ralcorp shareholders in connection with the proposed merger.Information about Ralcorps directors and executive officers is set forth in its proxy statement forits 2012 Annual Meeting of Shareholders, which was filed with the SEC on January 13, 2012,and its Annual Report on Form 10-K for the year ended September 30, 2011, which was filedwith the SEC on December 14, 2011 and on September 12, 2012. These documents are availablefree of charge at the SECs website at www.sec.gov, and by mail at Attention: InvestorRelations, 800 Market Street, St. Louis, Missouri 63101, or by going to Ralcorps InvestorRelations page on its corporate website at www.ralcorp.com. Additional information regardingthe interests of participants in the solicitation of proxies in connection with the proposed merger

will be included in the proxy statement that Ralcorp intends to file with the SEC.

Source: ConAgra Foods, Inc.

For ConAgra Foods:Investor InquiriesChris Klinefelter, 402-240-4154Vice President, Investor Relationsor

edia InquiriesTeresa Paulsen, 402-240-5210Vice President, Communication & External RelationsorBrunswick GroupSteven Lipin / Gemma Hart212-333-3810

For Ralcorp:Investor InquiriesMatt Pudlowski, 314-877-7091

Director, Business Developmentoredia Inquiries

Joele Frank, Wilkinson Brimmer KatcherEric Brielmann / Eric Bonach / Aaron Palash212-355-4449
http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.sec.gov&esheet=50489325&lan=en-US&anchor=www.sec.gov&index=6&md5=1277630aee7264425c1bac66e5110862http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.sec.gov&esheet=50489325&lan=en-US&anchor=www.sec.gov&index=6&md5=1277630aee7264425c1bac66e5110862http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.sec.gov&esheet=50489325&lan=en-US&anchor=www.sec.gov&index=7&md5=96db431759754acd08cf417d8a5cdb14http://www.ralcorp.com/http://www.ralcorp.com/http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.sec.gov&esheet=50489325&lan=en-US&anchor=www.sec.gov&index=7&md5=96db431759754acd08cf417d8a5cdb14http://cts.businesswire.com/ct/CT?id=smartlink&url=http%3A%2F%2Fwww.sec.gov&esheet=50489325&lan=en-US&anchor=www.sec.gov&index=6&md5=1277630aee7264425c1bac66e5110862


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Entry into a Material Definitive Agreement.

Agreement and Plan of Merger

On November 26, 2012, ConAgra Foods, Inc., a Delaware corporation (ConAgra Foods), Ralcorp Holdings, Inc.,a Missouri corporation (Ralcorp), and Phoenix Acquisition Sub Inc., a Missouri corporation and a wholly-ownedsubsidiary of ConAgra Foods (Merger Sub), entered into an Agreement and Plan of Merger (the Merger

Agreement) under which ConAgra Foods has agreed to acquire Ralcorp.

Pursuant to the Merger Agreement, and subject to the satisfaction or waiver of the conditions therein, Merger Subwill be merged with and into Ralcorp (the Merger), with Ralcorp surviving as a wholly-owned subsidiary ofConAgra Foods. At the effective time of the Merger, each outstanding share of Ralcorp common stock will beconverted into the right to receive $90 per share in cash, without interest.

The parties obligations to complete the Merger are conditioned upon (i) the receipt of antitrust approvals in theUnited States and Canada, (ii) approval of the Merger Agreement by the holders of two-thirds of the outstandingshares of Ralcorp common stock and (iii) certain other customary closing conditions. Consummation of the Mergeris not subject to a financing condition.

ConAgra Foods intends to finance the Merger, including related fees and expenses, with cash on hand, borrowingsunder its existing credit facilities and new long-term debt. ConAgra Foods has obtained a commitment letter fromBank of America, N.A. and Merrill Lynch, Pierce, Fenner & Smith Incorporated for a new $4.5 billion seniorunsecured bridge facility and a $1.5 billion senior unsecured term loan. ConAgra Foods may issue other long-termdebt and/or equity securities on or prior to the closing of the Merger that would reduce the amount of its borrowingsunder the bridge facility on a corresponding basis.

The Merger Agreement includes customary representations, warranties and covenants of ConAgra Foods andRalcorp. Among other things, Ralcorp has agreed (i) to cause a shareholder meeting to be held to consider approvalof the Merger Agreement, (ii) subject to certain exceptions, that its board of directors will recommend approval ofthe Merger Agreement by Ralcorps shareholders, (iii) not to solicit p roposals relating to alternative businesscombination transactions and (iv) subject to certain exceptions, not to enter into discussions concerning or provideinformation to third parties in connection with alternative business combination transactions.

Prior to the approval of the Merger Agreement by Ralcorps shareholders, Ralcorps board of directors may, upon

receipt of a Superior Proposal (as defined in the Merger Agreement) and in certain other circumstances, change itsrecommendation that Ralcorps shareholders approve the Merger Agreement, subject to complying with certainnotice and other specified conditions set forth in the Merger Agreement, including giving ConAgra Foods theopportunity to propose changes to the Merger Agreement in response to an alternative transaction proposal orintervening event. If Ralcorps board of directors changes its recommendation that Ralcorps shareholders approvethe Merger Agreement, ConAgra Foods may terminate the Merger Agreement. In addition, prior to the approval ofthe Merger Agreement by Ralcorps shareholders, Ralcorp may terminate the Merger Agreement to enter into adefinitive agreement providing for a Superior Proposal.

The Merger Agreement contains certain other termination rights for each of ConAgra Foods and Ralcorp, includingthe right of each party to terminate the Merger Agreement if the Merger has not been consummated by the nine-month anniversary of the date of the Merger Agreement (the End Date).

If the Merger Agreement is terminated (i) as a result of a change in the recommendation of Ralcorps board ofdirectors that Ralcorps shareholders approve the Merger Agreement or (ii) in connection with Ralcorps enteringinto a definitive agreement providing for a Superior Proposal, then Ralcorp will be required to pay ConAgra Foods atermination fee of $180 million (the Termination Fee). Ralcorp will also be required to pay ConAgra Foods theTermination Fee if the Merger Agreement is terminated because (a) Ralcorps shareholders have not approved theMerger Agreement or (b) the Merger has not been consummated prior to the End Date, but only if, in each case, aproposal for an alternative transaction is publicly announced after the date of the Merger Agreement and Ralcorpenters into


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a definitive agreement providing for, recommends that its shareholders tender into a tender offer in connection with,or consummates an alternative transaction within 12 months of such termination. In addition, Ralcorp will berequired to pay ConAgra Foods the Termination Fee if the Merger Agreement is terminated on the basis ofRalcorps intentional and material breach of its obligations under the Merger Agreement not to solicit alternativetransactions and to cause a shareholder meeting to be held to consider approval of the Merger Agreement, but only ifRalcorp enters into a definitive agreement providing for, recommends that its shareholders tender into a tender offerin connection with, or consummates an alternative transaction within 12 months of such termination.

BUSINESS

a) General Development of Business

ConAgra Foods, Inc. (ConAgra Foods, Company, we, us, or our) is one of North Americas leadingfood companies, with consumer brands in 97% of Americas households sold in grocery, convenience, massmerchandise, and club stores. ConAgra Foods also has a strong business-to-business presence, supplying frozenpotato and sweet potato products, as well as other vegetable, spice, and grain products to a variety of well-knownrestaurants, foodservice operators, and commercial customers.

The Company began as a flour-milling company and entered other commodity-based businesses. Over time,through various acquisitions and divestitures, we significantly changed our portfolio of businesses, focusing onadding branded, value-added opportunities, while strategically divesting commodity-based businesses to becomeone of North Americas leading food companies. Executing this strategy involved the acquisition over time of anumber of brands such asBanquet, Chef Boyardee,PAM,Marie Callenders, andAlexia. More notabledivestitures have included a dehydrated garlic, onion, capsicum, and fresh vegetable operation, a trading andmerchandising business, packaged meat and cheese operations, a poultry business, beef and pork businesses, andvarious other businesses. For more information about our more recent acquisitions and divestitures, seeAcquisitions and Divestitures below. Our development over time has also been aided by innovation and organicgrowth.

We are focused on growing our core operations, expanding into adjacent categories, and increasing ourpresence in private label and international operations. Our core operations include the strategic product groups ofconvenient meals, potatoes, snacks, meal enhancers, and specialty items. We are also focused on sustainable salesand profit growth with strong and improving returns on invested capital. As part of continually strengthening ouroperating foundation, our major profit-enhancing initiatives have centered on and continue to include:

Enhancing our portfolio by developing through innovation;

Acquiring products that resonate with consumers, establish or further develop our desired operatingplatforms, or which expand our presence in desired geographies or market segments; Implementing high-impact, insights-based marketing programs; Partnering strategically with customers to improve linkage, strengthen relationships, and capitalize on growth

opportunities; Improving trade spending effectiveness and pricing analytics; Achieving cost savings throughout the supply chain with continuous efficiency improvement programs; and Implementing efficiency initiatives throughout the selling, general, and administrative functions.

The Companys growth, efficiency, and portfolio improvement initiatives continue to be implemented withhigh standards of customer service, product safety, and product quality.

We were initially incorporated as a Nebraska corporation in 1919 and were reincorporated as a Delawarecorporation in December 1975.

Narrative Description of Business

We compete throughout the food industry and focus on adding value for customers who operate in the retailfood, foodservice, and ingredients channels.

Our operations, including our reporting segments, are described below. Our locations, including distributionfacilities, within each reporting segment, are described in Item 2, Properties.

Consumer Foods

The Consumer Foods reporting segment includes branded, private label, and customized food products, whichare sold in various retail and foodservice channels, principally in North America. The products include a variety of


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categories (meals, entres, condiments, sides, snacks, and desserts) across frozen, refrigerated, and shelf-stabletemperature classes.

Major brands include:Alexia,ACT II,Banquet,Blue Bonnet, Chef Boyardee,DAVID,Egg Beaters,Healthy Choice,Hebrew National,Hunts,Marie Callenders, Odoms Tennessee Pride, OrvilleRedenbachers,PAM, Peter Pan,Reddi-wip, Slim Jim, Snack Pack, Swiss Miss, Van Camps, and Wesson.

Commercial Foods

The Commercial Foods reporting segment includes commercially branded foods and ingredients, which aresold principally to foodservice, food manufacturing, and industrial customers. The segments primary productsinclude: specialty potato products, milled grain ingredients, a variety of vegetable products, seasonings, blends, andflavors which are sold under brands such as ConAgra Mills,Lamb Weston, and Spicetec Flavors & SeasoningsTM.


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EXECUTION COPY

AGREEMENT AND PLAN OF MERGERdated as of

November 26, 2012among

RALCORP HOLDINGS, INC.,

CONAGRA FOODS, INC.andPHOENIX ACQUISITION SUB INC.


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TABLE OF CONTENTS___________________

PAGEARTICLE 1

DEFINITIONSSection 1.01.Definitions 1Section 1.02. Other Definitional and Interpretative Provisions 8

ARTICLE 2THE MERGER

Section 2.01. The Merger 9Section 2.02. Conversion of Shares 10Section 2.03. Surrender and Payment 10Section 2.04.Dissenting Shares 12Section 2.05.Employee Equity 13Section 2.06.Adjustments 14Section 2.07. Withholding Rights 14Section 2.08.Lost Certificates 14

ARTICLE 3THE SURVIVING CORPORATION

Section 3.01.Articles of Incorporation 14Section 3.02.Bylaws 14Section 3.03.Directors and Officers 15

ARTICLE 4REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Section 4.01. Corporate Existence and Power 15Section 4.02. Corporate Authorization 15Section 4.03. Governmental Authorization 16Section 4.04.Non-contravention 16Section 4.05. Capitalization 17Section 4.06. Subsidiaries 18Section 4.07. SEC Filings and the Sarbanes-Oxley Act 19Section 4.08.Financial Statements 20

Section 4.09.Disclosure Documents 20Section 4.10.Absence of Certain Changes 20Section 4.11.No Undisclosed Material Liabilities 21Section 4.12. Compliance with Applicable Law 21

i

Section 4.13.Litigation 22Section 4.14.Properties 22Section 4.15.Intellectual Property 23Section 4.16. Taxes 23Section 4.17.Employees and Employee Benefit Plans 25Section 4.18.Environmental Matters 28Section 4.19.Material Contracts 29

Section 4.20.Finders' Fees 30Section 4.21. Opinion of Financial Advisor 30Section 4.22.Antitakeover Statutes 30

ARTICLE 5REPRESENTATIONS AND WARRANTIES OF PARENT

Section 5.01. Corporate Existence and Power 31Section 5.02. Corporate Authorization 31Section 5.03. Governmental Authorization 31Section 5.04.Non-contravention 31Section 5.05.Disclosure Documents 32


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Section 5.06.Finders' Fees 32Section 5.07.Financing 32Section 5.08. Ownership of Company Stock 32

ARTICLE 6COVENANTS OF THE COMPANY

Section 6.01. Conduct of the Company 33Section 6.02. Company Shareholder Meeting 36Section 6.03.No Solicitation; Other Offers 37Section 6.04.Access to Information 40Section 6.05. Certain Litigation 41

ARTICLE 7COVENANTS OF PARENT

Section 7.01. Obligations of Merger Subsidiary 41Section 7.02.Director and Officer Liability 41Section 7.03.Employee Matters 43Section 7.04. Certain Obligations of Parent 44

ARTICLE 8COVENANTS OF PARENT AND THE COMPANY

Section 8.01.Reasonable Best Efforts 44Section 8.02. Certain Filings 47

Section 8.03.Public Announcements 47Section 8.04.Further Assurances 47

ii

Section 8.05.Notices of Certain Events 48Section 8.06. Section 16 Matters 48Section 8.07.De-listing; Deregistration 48Section 8.08. Takeover Statutes 49

ARTICLE 9CONDITIONS TO THE MERGER

Section 9.01. Conditions to the Obligations of Each Party 49Section 9.02. Conditions to the Obligations of Parent and Merger Subsidiary 49Section 9.03. Conditions to the Obligations of the Company 50

ARTICLE 10TERMINATION

Section 10.01. Termination 51Section 10.02.Effect of Termination 52

ARTICLE 11MISCELLANEOUS

Section 11.01.Notices 53Section 11.02. Survival of Representations and Warranties 54Section 11.03.Amendments and Waivers 54Section 11.04.Expenses 55Section 11.05.Disclosure Schedule and SEC Document References 56Section 11.06.Binding Effect; Benefit; Assignment 56Section 11.07. Governing Law 57

Section 11.08.Jurisdiction 57Section 11.09. WAIVER OF JURY TRIAL 57Section 11.10.Financing Source Arrangements 58Section 11.11. Counterparts; Effectiveness 58Section 11.12.Entire Agreement 58Section 11.13. Severability 58Section 11.14. Specific Performance 59

iii


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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this Agreement) dated as of November 26, 2012, amongRALCORP HOLDINGS, INC., a Missouri corporation (the Company), CONAGRA FOODS, INC., a Delawarecorporation (Parent), and PHOENIX ACQUISITION SUB INC., a Missouri corporation and a wholly-ownedsubsidiary of Parent (Merger Subsidiary).

W I T N E S S E T H :WHEREAS, the respective Boards of Directors of Parent, the Company and Merger Subsidiary have

approved the execution of this Agreement and the transactions contemplated hereby and declared it advisable thatthe respective shareholders of the Company and Merger Subsidiary approve this Agreement pursuant to which,among other things, Parent would acquire the Company by means of a merger of Merger Subsidiary with and intothe Company on the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants andagreements contained herein, the parties hereto agree as follows:

ARTICLE 1DEFINITIONS

Section 1.01. Definitions. (a) As used herein, the following terms have the following meanings:Acquisition Proposal means, other than the transactions contemplated by this Agreement, any Third

Party offer, proposal or inquiry relating to, or any Third Party indication of interest in, (i) any acquisition orpurchase, direct or indirect, of 20% or more of the consolidated assets of the Company and its Subsidiaries or 20%

or more of any class of equity or voting securities of the Company or any of its Subsidiaries whose assets,individually or in the aggregate, constitute 20% or more of the consolidated assets of the Company and itsSubsidiaries, (ii) any tender offer (including a self-tender offer) or exchange offer that, if consummated, would resultin such Third Party beneficially owning 20% or more of any class of equity or voting securities of the Company orany of its Subsidiaries whose assets, individually or in the aggregate, constitute 20% or more of the consolidatedassets of the Company and its Subsidiaries or (iii) a merger, consolidation, share exchange, business combination,sale of substantially all the assets, reorganization, recapitalization, liquidation, dissolution or other similartransaction involving the Company or any of its Subsidiaries whose assets,

individually or in the aggregate, constitute 20% or more of the consolidated assets of the Company and itsSubsidiaries.

Affiliate means, with respect to any Person, any other Person directly or indirectly controlling, controlledby or under common control with such Person.

AntiBribery Laws means the U.S. Foreign Corrupt Practices Act of 1977, the UK Bribery Act of 2010and similar laws of any other applicable jurisdiction.

Applicable Law means, with respect to any Person, any transnational, domestic or foreign federal, s tateor local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation,order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied bya Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specifiedotherwise.

Business Day means a day, other than Saturday, Sunday or any other day on which commercial banks inNew York, New York are authorized or required by Applicable Law to close.

Code means the Internal Revenue Code of 1986. Collective Bargaining Agreement means any written agreement, memorandum of understanding or

other contractual obligation between the Company or any of its Subsidiaries and any labor organization or otherauthorized employee representative representing any current or former Service Provider.

Company Balance Sheet means the consolidated balance sheet of the Company as of September 30,2011 and the footnotes thereto set forth in the Company 10-K.Company Balance Sheet Date means September 30, 2011.Company Disclosure Schedule means the disclosure schedule dated the date hereof regarding this

Agreement that has been provided by the Company to Parent and Merger Subsidiary.Company Material Adverse Effect means a material adverse effect on (i) the financial condition,

business, assets or results of operations of the Company and its Subsidiaries, taken as a whole, excluding any effectto the extent resulting from (A) changes in the financial or securities markets or general economic or politicalconditions to the extent not having a disproportionate effect on the Company and its Subsidiaries, taken as a whole,relative to other companies primarily engaged in the private label food industry in the United States, (B) changes


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(including changes in Applicable Law or GAAP) or conditions generally affecting the private food label industry orthe businesses or

2

segments thereof to the extent not having a disproportionate effect on the Company and its Subsidiaries, taken as awhole, relative to other companies primarily engaged in the private label food industry in the United States, (C) anyfailure, in and of itself, by the Company to meet any internal or published projections, forecasts, estimates orpredictions in respect of revenues, earnings or other financial or operating metrics for any period, or any change, inand of itself, in the market price or trading volume of the Companys securities (it being understood that theunderlying cause of any such failure or change may be taken into account in determining whether a CompanyMaterial Adverse Effect has occurred or is reasonably likely to occur), (D) acts of war, sabotage or terrorism orother hostilities or any worsening of any of the foregoing currently threatened or underway, or natural disasters, ineach case to the extent not having a disproportionate effect on the Company and its Subsidiaries, taken as a whole,relative to other companies primarily engaged in the private label food industry in the United States or (E) theexecution and delivery of this Agreement or the announcement or pendency of the transactions contemplated by thisAgreement, including the impact thereof on the relationships, contractual or otherwise, of the Company or any of itsSubsidiaries with employees, labor unions, customers, suppliers or partners or (ii) the Companys ability toconsummate the transactions contemplated by this Agreement.

Company Rights means the rights to purchase Series E Junior Participating Cumulative Preferred Stockissued pursuant to the Company Rights Agreement.

Company Rights Agreement means the Shareholder Protection Rights Agreement dated May 4, 2011by and between the Company and Computershare Trust Company, N.A., as Rights Agent.

Company Stock means the common stock, $0.01 par value, of the Company.Company Tax Representation Letter means the representation letter delivered by the Company to

Davis Polk & Wardwell LLP on or prior to the date hereof.Company 10-K means theCompanys annual report on Form 10-K for the fiscal year ended September

30, 2011, as amended.Competition Act means the Competition Act(Canada), as amended.Continuing Employee means each individual who is an employee of the Company or any of its

Subsidiaries immediately prior to the Effective Time and who is employed by Parent or one of its Subsidiariesimmediately following the Effective Time.

3

Employee Plan means (i) each employee benefit plan, as defined in Section 3(3) of ERISA, (ii) eachemployment, severance or similar contract, plan, arrangement or written policy and (iii) each other plan orarrangement providing for compensation, bonuses, profit-sharing, stock option or other stock related rights or otherforms of incentive or deferred compensation, vacation benefits, insurance (including any self-insured arrangements),health or welfare benefits, employee assistance program, disability or sick leave benefits, workers compensation,supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (includingcompensation, pension, health, medical or life insurance benefits), in each case whether or not written, (x) that issponsored, maintained, administered or contributed to by the Company, its Subsidiaries or any of its or theirAffiliates for the current or future benefit of any current or former Service Provider or (y) with respect to which theCompany or any of its Subsidiaries has any direct or indirect liability, excluding any multiemployer plan (as definedin Section 3(37) of ERISA).

Environmental Laws means any Applicable Laws or any agreement with any Governmental Authorityrelating to human health and safety, the indoor or outdoor environment or to pollutants, contaminants, wastes,

chemicals or other toxic or otherwise hazardous substances.Environmental Permits means all licenses, authorizations, permits, franchises, consents, approvals,variances, exemptions and orders relating to Environmental Laws and relating to the business of the Company orany of its Subsidiaries, as currently conducted.

ERISA means the Employee Retirement Income Security Act of 1974.ERISA Affiliate of any entity means any other entity that, together with such entity, would be treated as

a single employer under Section 414(b), (c) or (m) of the Code.GAAP means generally accepted accounting principles in the United States.


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Governmental Authority means any transnational, domestic or foreign federal, state or localgovernmental, regulatory or administrative authority, department, court, agency or official, including any politicalsubdivision thereof.

Hazardous Substance means any pollutant, contaminant, waste or chemical or any toxic, radioactive,ignitable, corrosive, reactive or otherwise hazardous substance, waste or material, or any substance, waste ormaterial having any constituent elements causing the substance to display any of the foregoing characteristics,including any substance, waste or material regulated, or for which liability may be imposed, under anyEnvironmental Law.

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HSR Act means the Hart-Scott-Rodino Antitrust Improvements Act of 1976.Intellectual Property means any and all of the following, whether or not registered, and all rights

therein, arising in any jurisdiction throughout the world: (i) trademarks, service marks, trade dress, logos, domainnames, Internet account names (including social networking and media names), rights of publicity, trade names,corporate names and all other source identifiers, and all goodwill associated with any of the foregoing; (ii)inventions and improvements thereto, whether or not patentable, invention disclosures, statutory inventionregistrations, design rights, patents and patent applications (including all reissues, divisions, continuations,continuations-in-part, extensions and reexaminations thereof); (iii) copyrights, including all derivative works, moralrights, renewals, extensions, reversions and restorations associated with such copyrights, now or hereafter providedby law, regardless of the medium of fixation or means of expression; (iv) computer software (including source code,

object code, firmware, operating systems and specifications); (v) Trade Secrets; (vi) any other type of intellectualproperty or intellectual property right; (vii) registrations and applications for registration of any of the foregoing;and (xiii) rights to sue or recover and retain damages, costs and attorneys fees for past, present or futureinfringement, misappropriation or other violation of any of the foregoing.

International Plan means any Employee Plan that is not a US Plan.IRS means the United States Internal Revenue Service.IT Assets means computers, computer software, firmware, middleware, servers, workstations, routers,

hubs, switches, data communications lines and all other information technology equipment, and all associateddocumentation, owned by or licensed or leased to the Company or any of its Subsidiaries.

Key Employee means each corporate officer or person with a title of vice president or above of theCompany.

knowledge of any Person that is not an individual means the actual knowledge of the individuals setforth in Section 1.01 of the Company Disclosure Schedule, in the case of the Company or any of its Affiliates, or of

the individuals set forth in Section 1.01 of the Parent Disclosure Schedule, in the case of Parent or any of itsAffiliates.

Licensed Intellectual Property means any and all Intellectual Property owned by a Third Party andlicensed, sublicensed or otherwise made available to the Company or any of its Subsidiaries.

Lien means, with respect to any property or asset, any mortgage, lien, pledge, charge, security interest,encumbrance or other adverse claim of any kind in respect of such property or asset. For purposes of this Agreement,a Person

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shall be deemed to own subject to a Lien any property or asset that it has acquired or holds subject to the interest ofa vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating tosuch property or asset.

Missouri Law means the General and Business Corporation Law of Missouri.

1933 Act means the Securities Act of 1933.1934 Act means the Securities Exchange Act of 1934. NYSE means the New York Stock Exchange, Inc.Owned Intellectual Property means any and all Intellectual Property owned or purported to be owned

by the Company or any of its Subsidiaries.Parent Disclosure Schedule means the disclosure schedule dated the date hereof regarding this

Agreement that has been provided by Parent to the Company.Parent Material Adverse Effect means a material adverse effect on Parents or Merger Subsidiarys

ability to consummate the transactions contemplated by this Agreement.PBGC means the Pension Benefit Guaranty Corporation.


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Person means an individual, corporation, partnership, limited liability company, association, trust orother entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

Plant Manager means each plant manager employed by the Company or one of its Subsidiaries.Private Letter Ruling means the private letter ruling received by the Company from the IRS, dated

January 19, 2012, regarding the federal income tax consequences of the distribution by the Company of the stock ofPost Holdings, Inc. and certain related transactions.

Sarbanes-Oxley Act means the Sarbanes-Oxley Act of 2002.SEC means the Securities and Exchange Commission. Service Provider means any director, officer, employee orindependent contractor (who is an individual)

of the Company or any of its Subsidiaries.Subsidiary means, with respect to any Person, any entity of which securities or other ownership interests

having ordinary voting power to elect a6

majority of the board of directors or other persons performing similar functions are at any time directly or indirectlyowned by such Person.

Third Party means any Person, including as defined in Section 13(d) of the 1934 Act, other than Parentor any of its Affiliates.

Trade Secrets means trade secrets and other information, including data, know-how, unpatentedinventions, processes, formulae, source code, models and methodologies, that is not generally known or publicly

available, and all rights in any jurisdiction to limit the use or disclosure thereof by any Person.US Plan means any Employee Plan that covers any current or former Service Providers who are located

primarily within the United States.(b) Each of the following terms is defined in the Section set forth opposite such term:

Term SectionAdverse Recommendation Change 6.03Agreement PreambleCertificates 2.03Closing 2.01Commissioner 9.02Company PreambleCompany Cash RSU 2.05Company Cash SAR 2.05

Company Option Awards 2.05Company Board Recommendation 4.02Company Filings 4.07Company Permits 4.12Company Restricted Share 2.05Company Restricted Stock Award 2.05Company SEC Documents Article 4Company Securities 4.05Company Shareholder Approval 4.02Company Shareholder Meeting 6.02Company Stock Option 2.05Company Stock RSU 2.05Company Stock SAR 2.05

Company Subsidiary Securities 4.06Competition Act Approval 9.02Confidentiality Agreement 6.03D&O Insurance 7.02Debt Commitment Letter 11.10Effective Time 2.01e-mail 11.01End Date 10.01

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Term SectionExchange Agent 2.03Exchange Fund 2.03Financing Sources 11.10Indemnified Person 7.02Lease 4.14Material Contract 4.19Merger 2.01Merger Consideration 2.02Merger Subsidiary PreambleParent PreambleProxy Statement 4.09Receivables Facility 6.01Representatives 6.03Specified Contracts 4.19Superior Proposal 6.03Surviving Corporation 2.01Tax 4.16Taxing Authority 4.16Tax Return 4.16

Termination Fee 11.04Title IV Plan 4.17Uncertificated Shares 2.03WARN 4.17

Section 1.02. Other Definitional and Interpretative Provisions. The words hereof, herein andhereunder and words of like import used in this Agreement shall refer to this Agreement as a whole and not to anyparticular provision of this Agreement. The captions herein are included for convenience of reference only and shallbe ignored in the construction or interpretation hereof. References to Articles, Sections, Exhibits and Schedules areto Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified. All Exhibits andSchedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as ifset forth in full herein. Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein,shall have the meaning as defined in this Agreement. Any singular term in this Agreement shall be deemed to

include the plural, and any plural term the singular. Whenever the words include, includes or including areused in this Agreement, they shall be deemed to be followed by the words without limitation, whether or not theyare in fact followed by those words or words of like import. Writing, written and comparable terms refer toprinting, typing and other means of reproducing words (including electronic media) in a visible form. References toany statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulationspromulgated thereunder. References to any agreement or contract are to that agreement or contract as amended,modified or supplemented from time to time in accordance

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with the terms hereof and thereof;providedthat with respect to any agreement or contract listed on any scheduleshereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule.References to any Person include the successors and permitted assigns of that Person. References from or throughany date mean, unless otherwise specified, from and including or through and including, respectively.

ARTICLE 2THE MERGERSection 2.01. The Merger. (a) At the Effective Time, Merger Subsidiary shall be merged (the Merger)

with and into the Company in accordance with Missouri Law, whereupon the separate existence of MergerSubsidiary shall cease, and the Company shall be the surviving corporation (the Surviving Corporation).

(b) Subject to the provisions of Article 9, the closing of the Merger (the Closing) shall take place inNew York City at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York, 10017as soon as possible, but in any event no later than four Business Days after the date the conditions set forth in Article9 (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or, to theextent permissible, waiver of those conditions at the Closing) have been satisfied or, to the extent permissible,


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waived by the party or parties entitled to the benefit of such conditions (provided, however, that if such conditionsthat by their nature are to be satisfied at the Closing shall not have been satisfied or, to the extent permitted, waivedon such fourth Business Day, then the Closing shall take place on the fourth Business Day after which all suchconditions shall have been satisfied or, to the extent permitted, waived) or at such other place, at such other time oron such other date as Parent and the Company may mutually agree. Notwithstanding the foregoing, in no event shallParent or Merger Subsidiary be obligated to consummate the Closing prior to January 15, 2013.

(c) At the Closing, the Company and Merger Subsidiary shall file summary articles of merger with theSecretary of State of the State of Missouri and make all other filings or recordings required by Missouri Law inconnection with the Merger. The Merger shall become effective at such time (the Effective Time) as summaryarticles of merger are duly filed with the Secretary of State of the State of Missouri (or at such later time as may beagreed by Parent and the Company, as permitted by Missouri Law, and specified in the summary articles of merger).

(d) The effects of the Merger shall be as provided in this Agreement and in the applicable provisions ofMissouri Law. Without limiting the generality of the foregoing and subject thereto, from and after the EffectiveTime, the

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Surviving Corporation shall possess all the rights, privileges, immunities and franchises and be subject to all of theobligations and liabilities of the Company and Merger Subsidiary, all as provided under Missouri Law.

Section 2.02. Conversion of Shares. At the Effective Time, by virtue of the Merger and without any actionon the part of Parent, Merger Subsidiary, the Company or the holders of any shares of Company Stock or any shares

of capital stock of Parent or Merger Subsidiary:(a) Except as otherwise provided in Section 2.02(b), Section 2.02(c), Section 2.04, or Section 2.05, each

share of Company Stock outstanding immediately prior to the Effective Time (together with any Company Rightsattached to each such share) shall be converted into the right to receive $90.00 in cash, without interest (such pershare amount, the Merger Consideration). As of the Effective Time, all such shares of Company Stock shall nolonger be outstanding and shall automatically be canceled and retired and shall cease to exist, and shall thereafterrepresent only the right to receive the Merger Consideration to be paid in accordance with Section 2.03, withoutinterest.

(b) Each share of Company Stock held by the Company or owned by Parent immediately prior to theEffective Time (other than shares held for the account of clients, customers or other Persons) together with anyCompany Rights attached to each such share shall be canceled, and no payment shall be made with respect thereto.

(c) Each share of Company Stock held by any Subsidiary of either the Company or Parent immediatelyprior to the Effective Time shall be converted into such number of shares of stock of the Surviving Corporation such

that each such Subsidiary owns the same percentage in the Surviving Corporation immediately following theEffective Time as such Subsidiary owned in the Company immediately prior to the Effective Time.

(d) Each share of common stock of Merger Subsidiary outstanding immediately prior to the EffectiveTime shall be converted into and become one share of common stock of the Surviving Corporation with the samerights, powers and privileges as the shares so converted and, except as provided in Section 2.02(c), shall constitutethe only outstanding shares of capital stock of the Surviving Corporation.

Section 2.03. Surrender and Payment. (a) Prior to the Effective Time, Parent shall appoint an agentreasonably satisfactory to the Company (the Exchange Agent) for the purpose of exchanging for the MergerConsideration (i) certificates representing shares of Company Stock (the Certificates) or (ii) subject to Section2.05, uncertificated shares of Company Stock (the Uncertificated Shares). Substantially concurrently with theEffective Time, Parent shall deposit with the Exchange Agent the Merger Consideration, for the benefit of theholders of, and to be paid in respect of, the Certificates and the

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Uncertificated Shares (any funds deposited with the Exchange Agent, the Exchange Fund). Promptly after theEffective Time, Parent shall send, or shall cause the Exchange Agent to send, to each holder of shares of CompanyStock at the Effective Time a letter of transmittal and instructions (which shall specify that the delivery shall beeffected, and risk of loss and title shall pass, only upon proper delivery of the Certificates or transfer of theUncertificated Shares to the Exchange Agent) for use in such exchange.

(b) Each holder of shares of Company Stock that have been converted into the right to receive the MergerConsideration shall be entitled to receive, upon (i) surrender to the Exchange Agent of a Certificate, together with aproperly completed letter of transmittal, or (ii) receipt of an agents message by the Exchange Agent (or suchother evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of a book-entry


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transfer of Uncertificated Shares, the Merger Consideration in respect of the Company Stock represented by aCertificate or Uncertificated Share. Until so surrendered or transferred, as the case may be, each such Certificate orUncertificated Share shall represent after the Effective Time for all purposes only the right to receive such MergerConsideration.

(c) If any portion of the Merger Consideration is to be paid to a Person other than the Person in whosename the surrendered Certificate or the transferred Uncertificated Share is registered, it shall be a condition to suchpayment that (i) either such Certificate shall be properly endorsed or shall otherwise be in proper form for transfer orsuch Uncertificated Share shall be properly transferred and (ii) the Person requesting such payment shall pay to theExchange Agent any transfer, documentary, stamp or similar taxes required as a result of such payment to a Personother than the registered holder of such Certificate or Uncertificated Share or establish to the satisfaction of theExchange Agent that such tax has been paid or is not payable.

(d) After the Effective Time, there shall be no further registration of transfers of shares of CompanyStock. If, after the Effective Time, Certificates or Uncertificated Shares are presented to the Surviving Corporationor the Exchange Agent, they shall be canceled and exchanged for the Merger Consideration provided for, and inaccordance with the procedures set forth, in this Article 2.

(e) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section2.03(a) that remains unclaimed by the holders of shares of Company Stock six months after the Effective Time shallbe returned to Parent, upon demand, and any such holder who has not exchanged shares of Company Stock for theMerger Consideration in accordance with this Section 2.03 prior to that time shall thereafter look only to Parent forpayment of the Merger Consideration in respect of such shares without any interest thereon. Notwithstanding the

foregoing, Parent shall not be liable to any holder of shares of Company Stock for any amounts paid to a publicofficial pursuant to applicable

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abandoned property, escheat or similar laws. Any amounts remaining unclaimed by holders of shares of CompanyStock immediately prior to such time when the amounts would otherwise escheat to or become property of anyGovernmental Authority shall become, to the extent permitted by Applicable Law, the property of Parent free andclear of any claims or interest of any Person previously entitled thereto. Any portion of the Merger Considerationmade available to the Exchange Agent pursuant to Section 2.03(a) to pay for shares of Company Stock for whichappraisal rights have been perfected shall be returned to Parent, upon demand.

(f) The Exchange Agent shall invest any cash in the Exchange Fund as directed by Parent;provided,however, that any investment of such cash shall in all events be limited to direct short-term obligations of, or short-term obligations fully guaranteed as to principal and interest by, the U.S. government, in commercial paper rated A-

1 or P-1 or better by Moodys Investors Service, Inc. or Standard & Poors Corporation, respectively, or incertificates of deposit, bank repurchase agreements or bankers acceptances of commercial banks with capitalexceeding $50 billion (based on the most recent financial statements of such bank that are then publicly available),and that no such investment or loss thereon shall affect the amounts payable pursuant to this Agreement. Anyinterest and other income resulting from such investments shall be paid to Parent. In the event the Exchange Fundshall be insufficient to make the payments contemplated by this Agreement, Parent shall, or shall cause MergerSubsidiary to, promptly deposit additional funds with the Exchange Agent in an amount which is equal to thedeficiency in the amount required to make such payment. The Exchange Fund shall not be used for any purpose thatis not expressly provided for in this Agreement.

Section 2.04. Dissenting Shares.Notwithstanding Section 2.02 or any other provision of this Agreement tothe contrary, shares of Company Stock outstanding immediately prior to the Effective Time and held by a holderwho has not voted in favor of the Merger or consented thereto in writing and who is entitled to demand, and whoproperly demands payment of the fair value of such shares of Company Stock pursuant to, and who complies in all

respects with, Section 351.455 of the Missouri Law shall not be converted into the right to receive the MergerConsideration, unless and until such holder fails to perfect or effectively withdraws or loses the right to appraisalunder Missouri Law. If, after the Effective Time, such holder fails to perfect, withdraws or otherwise loses the rightto appraisal, such shares shall be treated as if they had been converted as of the Effective Time into the right toreceive the Merger Consideration without any interest thereon. The Company shall give Parent prompt notice of anydemands received by the Company for appraisal of any shares of Company Stock under Se