For Release: Immediate
Contacts: Ralcorp Holdings - Thomas G. Granneman (314) 877-7730
Agribrands International - David R. Wenzel (314) 812-0523
RALCORP HOLDINGS, INC. AND AGRIBRANDS INTERNATIONAL, INC. AGREE TO COMBINE
ST. LOUIS, MO, AUGUST 8, 2000. Ralcorp Holdings, Inc. (NYSE: RAH) and
Agribrands International, Inc. (NYSE: AGX) announced today they have entered
into a definitive agreement to combine in a merger-of-equals transaction. The
merger will create a company that has approximately $2.3 billion in sales and
the substantial cash flows and borrowing capacity needed to accelerate Ralcorp's
growth in private label foods.
The agreement, which has been unanimously approved by both companies' boards of
directors upon the recommendation of committees of independent members of both
boards, provides for Ralcorp and Agribrands shareholders to exchange their
shares in the existing companies for shares in a new holding company.
Shareholders will receive one share of the new company for each Ralcorp share
exchanged and three shares of the new company for each Agribrands share
exchanged. Alternatively, shareholders may elect to receive $15 in cash per
Ralcorp share or $39 in cash per Agribrands share. At least 80% of each
company's shares will be converted into stock of the new company. Any excess
cash elections will be reduced on a pro rata basis.
Assuming full utilization of the cash election option, the transaction is
expected to be immediately accretive to both sets of shareholders on a cash
basis. The transaction is expected to be tax-free to shareholders to the extent
they receive common stock of the new company and, in most circumstances, cash
received is expected to be taxed as capital gains. The combination is expected
to receive purchase accounting treatment for financial reporting purposes.
The transaction combines Ralcorp's leadership position in U.S. private label
foods with Agribrands' portfolio of premium animal feed businesses in 16
countries around the world. The combined company will have greater economic
scale and greater geographic and product line diversification. A key motivation
for the transaction is to enable the combined company to expand its domestic
private label food business. In order to maintain operational focus, the
businesses will continue to be managed separately with oversight from the new
holding company.
William P. Stiritz, Chairman and Chief Executive Officer of Agribrands and
Chairman of Ralcorp, will be Executive Chairman of the new company. Joe R.
Micheletto, Chief Executive Officer and President of Ralcorp, will become Chief
Executive Officer and President of the new company. Bill G. Armstrong,
currently Chief Operating Officer of Agribrands, will be named Chief Executive
Officer of the Agribrands subsidiary and will report to Mr. Micheletto. David
R. Wenzel, Chief Financial Officer of Agribrands, will become Chief Financial
Officer of the new company, also reporting to Mr. Micheletto. The Board of
Directors of the new company will be comprised of all the individual members of
the Ralcorp and Agribrands boards. The companies do not plan any layoffs or
substantial organizational changes as a result of the merger transaction and
will continue to maintain their headquarters in St. Louis, Missouri.
In introducing the reasons for the transaction, Mr. Stiritz stated:
"The respective spin-offs of Ralcorp and Agribrands from Ralston Purina Company
have been successful. Intensive focus on these businesses as independent
entities has generated improvements in management processes and business
strategies. However, we now expect that Agribrands' growth opportunities will
require only a portion of its financial resources, while Ralcorp appears to have
a number of attractive investment opportunities in areas where it has developed
a proven track record. Combining the resources of these two organizations will
permit both shareholder groups to benefit."
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Mr. Micheletto added:
"This merger should provide the combined company with the resources necessary to
continue aggressive pursuit of a long-term strategic plan to establish
leadership positions across a diversified line of private label foods. It
should permit us to expand the number of product categories we serve and broaden
our existing cereal, cookie, cracker, sauce, dressing and other wet filled
products, and snack nut offerings. It should provide the capacity for more and
larger transactions, like the recent purchase of The Red Wing Company, Inc."
The merger is conditioned, among other things, upon two-thirds approval of
Ralcorp and Agribrands shareholders, receipt of a ruling from the Internal
Revenue Service that the transaction will not affect the tax-free status of
Agribrands' spin-off from Ralston Purina Company in 1998, and customary
regulatory approvals. The transaction is expected to close in approximately six
months. Within the next eight weeks the parties anticipate filing a joint proxy
statement and prospectus with the Securities and Exchange Commission wherein
more details of the transaction will be disclosed. In connection with the
transaction, Mr. Stiritz and three other key managers have agreed to have
previous stock option grants converted into options to purchase stock of the new
company while retaining the existing vesting schedules, thereby waiving
acceleration of vesting which may otherwise have been triggered by the
transaction.
Wasserstein Perella & Co. and Houlihan, Lokey, Howard & Zukin Capital provided
fairness opinions to Agribrands in their respective roles as financial advisors
to the Company and advisors to Agribrands' Special Committee of Independent
Directors.
Banc of America Securities LLC and A.G. Edwards & Sons, Inc. provided fairness
opinions to Ralcorp in their respective roles as financial advisors to the
Company and advisors to Ralcorp's Special Committee of Independent Directors.
About Ralcorp Holdings
------------------------
Since 1997, Ralcorp has built its private label business from its base of
cereals and crackers through ten acquisitions: Wortz Company, Sugar Kake Cookie
Inc., Ripon Foods, Inc. and Cascade Cookie Company, Inc. (private label cookies
and crackers); Nutcracker Brands, Inc., Flavor House Products, Inc. and Southern
Roasted Nuts of Georgia, Inc. (private label and value-branded snack nuts);
James P. Linette, Inc. (private label chocolate candy); Martin Gillet & Co.,
Inc. and The Red Wing Company, Inc. (peanut butter, jams and jellies, syrups,
mayonnaise, salad dressings and other wet filled products). Today Ralcorp is the
leading U.S. manufacturer of private label ready-to-eat and hot cereals,
crackers, snack nuts, mayonnaise, salad dressings and table syrups, with a
leading position in other wet filled products and cookies. In addition, Ralcorp
holds a 21.8% stake in Vail Resorts, Inc., the premier mountain resort operation
in North America.
About Agribrands
-----------------
Agribrands is a leading international producer and marketer of a broad line of
animal feeds and other agricultural and nutrition products for hogs, dairy cows,
beef cattle, poultry (broilers and layers), rabbits, horses, shrimp and fish.
The Company operates 71 manufacturing plants in 16 countries on four continents.
Among commercial producers of complete animal feeds, management believes
Agribrands is the most geographically diversified. Its local operations
typically rank among the top three in share of commercial animal feed in the
countries in which it operates. The Company competes primarily on the basis of
advanced formulation technology using proprietary nutrition and ingredient
expertise to provide higher performing products or lower input costs.
This release contains forward-looking statements within the definition of the
Securities Act of 1933 and the Securities Exchange Act of 1934. Although the
companies believe that these statements are based on reasonable assumptions,
they can give no assurance that their goals will be achieved. Information
contained in this release with respect to the impact of the proposed merger
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contains forward-looking statements. Also, the words "should," "estimates,"
"believes," "expects," "anticipates," "plans" and "intends," variations of such
words, and similar expressions are intended to identify forward-looking
statements that involve risk and uncertainty. These statements are necessarily
based upon various assumptions involving judgments with respect to the future
including, among others, the ability to achieve synergies and revenue
enhancements; the ability to identify appropriate acquisition targets; national,
international, regional and local economic, competitive and regulatory
conditions and developments; technological developments; capital market
conditions; inflation rates; interest rates; currency fluctuations; business and
regulatory or legal decisions; the timing and extent of changes in commodity
prices for certain agricultural products; the timing and success of business
development efforts; weather conditions and other uncertainties, all of which
are difficult to predict and many of which are beyond the control of the
companies. Accordingly, while the companies believe that the assumptions are
reasonable, there can be no assurance that they will approximate actual
experience, or that the expectations will be realized. Other risk factors are
detailed from time to time in the SEC reports of each company.
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