ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, August 15, 1996 TAG: 9608150041
SECTION: BUSINESS PAGE: B-7 EDITION: METRO
DATELINE: ST. LOUIS
SOURCE: Associated Press
Trying to escape a cereal price crunch, Ralcorp said Wednesday it will sell its Chex line to competitor General Mills, maker of Cheerios and Wheaties.
The $570 million deal edges General Mills closer to industry leader Kellogg Co. as the top players in the $8 billion cereal market continue the price war that signaled Ralcorps' exit.
In addition to Chex, General Mills will get such brands as Cookie Crisp and Almond Delight ready-to-eat cereal brands and Chex Mix snacks. The Golden Valley, Minn.-based company also will acquire a Cincinnati plant that employs 240 people.
The deal effectively ends Ralcorp's losing battle to compete with better-known cereals. Ralcorp is the nation's fourth-largest cereal maker but fifth in brand-name cereals.
It will continue making private-label cereals, typically sold under store names, where it is the industry leader with about 60 percent of the market.
``The price cuts that came about really hurt them,'' Tony Vento, an analyst with Edward Jones. ``Ralcorp is just too small a player to really compete with the big boys.''
Ralcorp stock rose more than 12 percent or $2.50 per share to $22.50 on the New York Stock Exchange. General Mills stock fell 25 cents to $55.121/2.
Since spring, the breakfast cereal business has been engulfed in a price war. That took a toll on Ralcorp, which began talking with potential buyers last spring.
Last month, it announced it was selling its Keystone, Breckenridge and Arapahoe Basin ski resorts to Vail Associates for about $310 million. It retained a 25 percent interest.
The two deals leave it making store brand cereals, which Vento called ``a business that's growing and one they've done pretty well at in the past.''
That business and Ralcorp's other businesses - crackers and cookies and its Beech-Nut baby food line - will be spun off as a new company with the same name. Ralcorp said it will be left with little or no debt and about $500 million in annual revenues.
LENGTH: Short : 47 lines ILLUSTRATION: GRAPHIC: Chart by AP.by CNB