Boston, MA 07/07/2014 (wallstreetpr) – A company that ConAgra Foods Inc (NYSE:CAG) pursued aggressively to acquire has become a bigger problem than expected.
Interested in becoming the No. 1 private-label food business, ConAgra spared no effort to acquire Ralcorp Holdings. As a matter of fact, the company’s three bids were rejected by the management of Ralcorp, but it kept on trying until it won the private-label business for $5 billion.
However, one full-year down the line, uncomfortable truths are emerging such that ConAgra CEO Gary Rodkin has blamed Ralcorp as a flawed company.
Overpaid for acquisition
Nothing best illustrates the fact that ConAgra Foods Inc (NYSE:CAG) overpaid for Ralcorp than the $605 million writedown. CEO Rodkin told investors that he expects private-label profits to be below the previous estimates for several years.
ConAgra reported its first full-year results since acquiring Ralcorp where it revealed challenges in the private-label segment to the extent that the company has been forced to reduce prices to encourage sales. The company reported more than 50 percent decline in 4Q operating income in the private label segment.
Supply disruption
As if the problems inherited from Ralcorp were not enough, ConAgra Foods Inc (NYSE:CAG) went ahead to suffer operational impact at one of its private-label plants. The company’s operations were affected by supply disruption and, as a result, it was forced to trim prices so as to placate the customers affected by the operational hitch. Of course, that added to the financial pain that the company already faces in the private brands business.
Although the acquisition of Ralcorp has mostly delivered bad news, the management of ConAgra Foods Inc (NYSE:CAG) believes that all is not lost. First and foremost, the CEO Rodkin told investors that they were prepared for challenges in the business expect that they have become bigger than expected. However, he believes that the future is bright for the company in both branded and private label foods.
