Mergers

Ralcorp's Stellar Dealmaker


Since March, William P. Stiritz, the chairman and chief dealmaker of Ralcorp Holdings (RAH), has spurned two unsolicited takeover offers from ConAgra Foods (CAG). If Stiritz, 76, squeezes a higher price from ConAgra and changes his mind—which analysts including BB&T's Heather Jones say is likely—the sale would cap three decades of dealmaking. "He's probably among the best moneymakers of the past 30 years," says John McMillin, a food industry analyst at Prudential Securities from 1985 to 2007. "He's right up there with [former Nabisco and Gillette (PG) Chief Executive] Jim Kilts and Colgate's (CL) Reuben Mark. He's a Warren Buffett-like character, but stays out of the limelight."

Stiritz, who declined to comment for this story, became chief executive of Ralcorp's predecessor in 1981. Back then, Ralston Purina was a mishmash of unrelated businesses, including the St. Louis Blues hockey team and a mushroom farm. Stiritz jettisoned every piece of Ralston Purina that did not fit his vision of a top-notch consumer products company, including the animal feed business that had been the company's core since its founding in 1894. "He's a focused, numbers-driven guy," says Jim Nichols, who worked for Stiritz for more than 25 years at Ralston and Ralcorp. "He has little emotional attachment to companies."

Raised by his grandparents in rural northwest Arkansas, Stiritz earned a master's degree in European history from St. Louis University in 1968. After working at a St. Louis ad agency, Stiritz joined Ralston Purina as a marketing executive and worked his way up the ranks. As CEO, he concentrated on strategy. "Was he charismatic? No. But he was brilliant," says Nichols. "He was three or four moves ahead of his peers."

Stiritz sold parts of Ralston and added others such as Eveready Battery, maker of Energizer, which he bought from Union Carbide in 1986. In 1989 he bought Beech-Nut, a baby food maker that lagged industry leader Gerber and had lost money for years. Stiritz cut costs, jazzed up marketing, and turned Beech-Nut around. Five years later, he spun off Ralston Purina's cereal, baby food, and other units into Ralcorp. Stiritz chaired Ralcorp's board and remained chairman and CEO of Ralston Purina. In 2000, he spun off Energizer Holdings (ENR), the battery business, and served as chairman until 2007.

In 2001, Stiritz sold Ralston Purina—by then just a pet-chow business—to Nestlé and focused on building Ralcorp. He expanded into nuts, sauces, and frozen foods, then acquired Post, maker of Grape-Nuts, from Kraft Foods (KFT) in 2008. Last year Stiritz paid $1.2 billion for American Italian Pasta, which makes store-brand spaghetti for Wal-Mart Stores (WMT) and other grocers.

Today Ralcorp generates $4 billion in sales, three-quarters of it from private-label cereal, pasta, sauces, and other foods. Sales in the first half of its 2011 fiscal year rose 20 percent, and on May 2 the company forecast full-year profit that surpassed analysts' expectations, fueled by the performance of those acquisitions. Over the 10 years through Apr. 28, Ralcorp stock rose 356 percent, compared with 100 percent for the Standard & Poor's 400 MidCap stock index, of which Ralcorp is a component. That doesn't count the 23 percent surge to $87.79 from Apr. 29 to May 24 fueled by the ConAgra takeover talk. Those who have worked and invested with Stiritz say he'll sell Ralcorp to ConAgra eventually, once he gets the price he's after—somewhere between $92 and $100 per share. "There's a willingness to do a deal," says Jack Murphy, senior portfolio manager at Levin Capital Strategies, which owns Ralcorp shares. ConAgra declined to comment.

"This is his last hurrah, so he's pushing for everything he can get," says Nichols, the former Ralcorp executive. "Nobody would have looked at Ralcorp in 1994 and imagined that, 17 years later, it would be a $100-a-share business. Nobody."

The bottom line: If he gets the right price, dealmaker Stiritz may sell Ralcorp to ConAgra. The stock is up 23 percent since Apr. 29 on takeover chatter.

Boyle is a reporter for Bloomberg News and Bloomberg Businessweek in London.

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