It’s been nearly 6 months since Ralcorp(RAH) announced plans to spin off Post Holdings and not much has changed. The interest that had been expressed by Conagra(CAG) never materialized into a transaction as Ralcorp management
continued to reject buyout offers. Today, the company took the mildly unusual step of issuing a press release noting that it has amended its Form 10. The release noted that the new company, which will trade on the NYSE under the ticker POST, will be distributed around the end of January 2012. Also noted was that Ralcorp will extract $900 million in cash from Post prior to the spinoff, funded by debt which will stay with Post. In July, we had noted that this was expected to be in the $1.1 billion to $1.2 billion range, so this may imply that Post was unable to borrow the full amount anticipated. Ralcorp plans to use the cash to reduce debt, make acquisitions, and buyback stock. Ralcorp will also retain up to 20% of Post.
Today’s filing shows that Post lost $368.9 million in 2011 on a pro-forma basis, but that includes a $503.5 million non-cash charge for impaired goodwill, writing down the cost of Ralcorp’s purchase of Post. It would seem that the company has sufficient cash flow to both service and pay down debt. At the right price, investors may be able to take advantage of a consistently profitable business with results improving as it incrementally deleverages.
Disclosure: The author holds no position in any stock mentioned