Ending a short-lived marriage, Ralcorp(RAH) announced plans today to spin off its Post Cereals business as an independent company. The company hopes to complete the spinoff in the next 4 to 6 months. Ralcorp. which itself was spun out of Ralston Purina in 1994, purchased the Post Brands from Kraft(KFT) in August 2008. Ralcorp, which will continue to be a leading producer of private brand foods will improve its balance sheet by issuing $1.1-$1.2Billion in new debt for Post and keeping the cash for itself. Post Brands will have to sell a lot of Fruity Pebbles and Honey Bunches Of Oats to service that debt. Ralcorp’s chairman will move to Post, though the company is still searching for a CEO to lead the new company.
Ralcorp has been pursued for some time by Conagra(CAG). It will be interesting to see Conagra’s response to today’s news.
Disclosure: The author owns no position in any stock mentioned