(Reuters) — TreeHouse Foods Inc (THS.N) is in advanced talks to acquire Ralcorp, the private label business of ConAgra Foods Inc (CAG.N), in a deal that could be valued between $2.5 billion and $2.7 billion, according to people familiar with the matter.
After considering other alternatives, such as selling Ralcorp to a private equity firm or breaking it up, ConAgra is now engaged in negotiations with TreeHouse in an effort to finalize a deal, the people said this week.
Ralcorp’s spreads, nuts and pretzels business would complement TreeHouse’s existing condiment and healthy snacks business, the people said.
There is no certainty that an agreement with TreeHouse will be reached, the people said. If talks fail, ConAgra may try again to sell Ralcorp to a buyout firm, the people added.
The sources asked not to be identified because details of the sale process are confidential. ConAgra and TreeHouse declined comment.
Ralcorp’s sale would mark the conclusion of a saga that started when private label business Ralcorp, edged on by activist investor Corvex, sold to ConAgra for $5.1 billion two years ago.
At the time, the maker of Chef Boyardee canned products and Slim Jim touted the acquisition as an opportunity to become a powerful food giant.
Ralcorp, which includes cereal, pasta, crackers, jams and jellies, syrups and frozen waffles, had since been plagued by integration costs and pressured profit margins. ConAgra Chief Executive Officer Gary Rodkin, who helped oversee the acquisition of Ralcorp, left the company earlier this year.
Since Sean Connolly joined ConAgra as chief executive in April 2015, the former CEO of the Hillshire Brands Company has sought to revive the business. In his first earnings call in June, he announced intentions to exit the private label business.
This month, Connolly announced cost-cutting initiatives that included laying off around 1,500 jobs and moving company headquarters from Omaha, Nebraska to Chicago.
In ConAgra’s third-quarter earnings, the private brands segment recorded an operating loss of $1.3 billion, due to an impairment of goodwill that the company blamed on a further deterioration of the business.
Connolly has faced investor pressure as well this year, namely from activist hedge fund Jana Partners LLC. ConAgra agreed to two directors to its board, including a former Nestle SA (NESN.VX) executive, nominated by Jana.
ConAgra has said it is hoping to finalize the sale of the private brands business this fall.
TreeHouse’s recent purchases include better-for-you snack company Flagstone Foods for approximately $860 million last year.