General Mills Gets OK for Ralcorp Cereal Deal

General Mills can move forward with its $570-million purchase of Ralcorp Holdings’ Chex brand cold cereals, but with some restrictions, the Federal Trade Commission said Thursday.

General Mills, America’s second-largest cereal maker, agreed to drop restrictions on the sale of private-label versions of Chex as a condition of the FTC’s antitrust approval for the purchase.

Without an agreement to protect generic competition, the FTC said, noncompete provisions in General Mills’ acquisition agreement could have damaged competition and raised prices for Ralcorp’s flagship Chex. The waffle-shaped cereal, mixed with pretzels, nuts and spices, is a staple of American entertaining.

After the agreement was announced, St. Louis-based Ralcorp said shareholders will meet Jan. 31 to vote on the sale.

“We are confident that our shareholders will approve the merger, which will allow us to realize, tax free, $570 million in shareholder value,” said Ralcorp Chief Executive Joe R. Micheletto. “The General Mills transaction will also allow us to greatly improve Ralcorp’s balance sheet, through significant reduction in our debt.”

Minneapolis-based General Mills had no immediate comment.

Shares of Ralcorp rose $1.125 to close at $20, while General Mills lost 12.5 cents to close at $65.50. Both trade on the New York Stock Exchange.

Along with Chex, General Mills is acquiring exclusive rights to the Cookie Crisp and Almond Delight cereal brands, prepackaged versions of Chex Mix snacks, and a manufacturing plant in Cincinnati.

General Mills, which makes Cheerios, Wheaties and other popular brands, will boost its position as America’s No. 2 manufacturer of brand-name cereal, behind Battle Creek, Mich.-based Kellogg.

Ralcorp, which was spun off from Ralston-Purina Group in 1994, will continue producing private-label cereals, which are similar versions of brand-name products sold under a store’s own name.