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The total offer consists of approximately 8.1 million shares to be issued at a price of $29.50 (the closing price on December 31, 2012). In addition, the company has also offered the underwriter a 30-day option to purchase shares worth $35.0 million.
The proceeds from the issue will be utilized to fund ConAgra’s pending acquisition of Ralcorp Holdings Inc. ( ) at a price of $90.0 per share. The acquisition was announced in late November last year. In case the acquisition does not get through, the proceeds will be utilized for general corporate purposes.
The acquisition, valued at $6.8 billion, is expected to be complete by March 2013, subject to regulatory approvals. Subsequent to the acquisition of Ralcorp, ConAgra will emerge as the largest private label packaged food company in North America. Management expects the combined entity to garner sales of over $18 billion in the future. Starting from the fourth year, ConAgra is expected to derive cost synergies of about $225 million per year from the acquisition.
The company had a total of 405.8 million shares and a market capital of $12.18 billion at the close of trading on January 3, 2013.
We currently have a Neutral recommendation on CAG. The stock bears a Zacks #2 Rank (Buy), while its prime competitors H.J. HEINZ CO. ( HNZ - Analyst Report ) and BRF-Basil Foods S.A. ( BRFS - Snapshot Report ) carry a Zacks #3 (Hold) Rank.
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