Newspaper article St Louis Post-Dispatch (MO)

Ralston to Spin off Its Last Farm Unit Overseas Feed Business to Remain Based Here

Newspaper article St Louis Post-Dispatch (MO)

Ralston to Spin off Its Last Farm Unit Overseas Feed Business to Remain Based Here

Article excerpt

Ralston Purina Co. will get rid of its last major farm-related business by spinning off its international feed company to shareholders late this year or early in 1997.

Ralston's decision to spin off the feed company comes nearly a year after Ralston canceled an agreement to sell it to Purina Mills Inc. of Brentwood. Purina Mills is the nation's largest feed company and was part of Ralston until 1986.

Ralston never explained why it called off the sale to Purina Mills other than to say that the two companies couldn't agree on terms. Purina Mills declined to comment on the spinoff, but last year its management expressed surprise and disappointment when Ralston broke off talks.

The Purina feed business was Ralston Purina's original business when it was founded on the St. Louis riverfront more than 100 years ago. Purina Mills has the rights to the Purina brand of farm feeds in the United States. Purina Chow is the name Ralston uses on most of its overseas feeds.

International feed accounted for $1.13 billion in sales - about one-fifth of Ralston's total - profit in the company's latest fiscal year, which ended Sept. 30. But Ralston's operating profit on feed was just $45.2 million, 6 percent of the company total.

Analysts applauded the spinoff plans Friday. Feed is the least profitable of Ralston's businesses.

By contrast, pet food accounted for 34 percent of continuing sales and 58 percent of operating profit. Batteries accounted for 39 percent of sales and 38 percent of operating profit, despite a major restructuring charge. Soy protein accounted for 6 percent of sales and 13 percent of operating profit.

Ralston has been shedding businesses for years, most recently selling off Continental Baking Co., originator of Wonder bread and Hostess Tw inkies. In 1994, Ralston spun off Ralcorp Holdings Co., which runs ski resorts in Colorado and makes Chex and private-label cereals, Beech-Nut baby food and a line of private-label crackers and cookies.

Michael Mauboussin, an analyst with CS First Boston, said the spinoff "seems like the final chapter" in Ralston's quest to bring its market-leading businesses to the forefront. …

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