New York City-based Levi & Korsinsky is investigating Ralcorp’s of board of directors for “possible breaches of fiduciary duty and other violations of state law in connection with the rejection of an unsolicited merger proposal from ConAgra Foods”.
Its probe was launched after Ralcorp rebuffed the advances of ConAgra Foods for the third time on August 12 and insisted that its plan to spin off its Post cereals business offered shareholders greater value, leaving the two firms with “nothing further to discuss”.
Levi & Korsinsky aims to establish ”whether the Board of Ralcorp is acting in Ralcorp shareholders’ best interests by refusing to enter into negotiations with ConAgra and rejecting the proposal”.
Is there really nothing further to discuss?
Its investigation comes hot on the heels of a note published by corporate governance expert ISS Governance claiming Ralcorp had failed to adequately explain its summary dismissal of ConAgra’s offer to shareholders.
Speaking to FoodNavigator-USA last week, co-author Chris Cernich said: “We’re not saying the board should have recommended for the offer. We’re pointing out that it’s critical for shareholders to understand why the board believes there’s a path to higher value available, particularly when the ConAgra offer would seem to present such a steep premium to the company’s unaffected market value.
“It is likely not enough to say ‘no’ – and nothing else – when shareholders cannot see an alternative path to a credible higher value.”
Ralcorp: Unlocking additional significant value of our shareholders
However, a Ralcorp spokesman insisted that the board’s decision to reject ConAgra’s latest offer had been taken “with the assistance of its financial and legal advisors”.
The board, he added, had “unanimously determined that the separation of Post Foods from Ralcorp will better allow each company to focus on strategies specific to their particular businesses, thereby unlocking additional significant value for our shareholders”.
On August 14, ConAgra chief executive Gary Rodkin claimed that by remaining independent, Ralcorp's private label business would be “more susceptible to the margin pressures from commodity cost volatility”, while an independent Post Foods would face the “uncertainty of operating as a highly leveraged company in the competitive cereal category without the benefit of a broader portfolio".
He added: “As part of our broader portfolio, both Ralcorp private label and Post would be better positioned to drive performance.”