Ralcorp shares rise as Conagra Foods attempts to take-over biggest US maker of store-brand foods

Traders have never been more confident they can secure a higher offer from ConAgra Foods Inc. (CAG) in its attempt to take over Ralcorp Holdings Inc. (RAH), the biggest U.S. maker of store-brand foods.

Ralcorp, which has increased by more than $1 billion in value in the past two weeks on takeover speculation, climbed 5.2 percent above ConAgra’s unsolicited all-cash proposal of $86 a share. The gap is the widest since the Omaha, Nebraska-based maker of Chef Boyardee pasta and Slim Jim meat sticks raised its original offer last week, indicating that merger arbitragers are betting ConAgra will be forced to boost its $4.9 billion bid, according to data compiled by Bloomberg.

While Ralcorp has spurned both of ConAgra’s offers and adopted a “poison pill” strategy to prevent hostile takeovers, ConAgra Chief Executive Officer Gary Rodkin signaled that he intends to take his proposal directly to shareholders. Buying St. Louis-based Ralcorp would hand Rodkin, who has rewarded owners with a gain of less than 4 percent since becoming CEO in 2005, control of a company that almost tripled its profit in the past five years. Ralcorp may be worth $104 a share, 27 percent more than ConAgra’s initial bid, BMO Capital Markets said.