Greenberg: ConAgra's Ralcorp Acquisition Backfiring?

SAN DIEGO (TheStreet) -- I have no idea what the short interest was in Ralcorp when it was bought last year by ConAgra (CAG), but I'm beginning to think it might have been higher than average.

When ConAgra bought Ralcorp a year ago, it was a big deal. Ralcorp was the largest U.S. maker of private label foods and, on the deal, its stock jumped 26%.

It was also one of those activist plays, with hedge fund Corvex's Keith Meister (the guy from ADT (ADT)) on the board -- pushing for the company to sell itself.

Fast-forward to today: ConAgra doesn't mince words in its earnings release, with a not-so-subtle confession that Ralcorp is giving it indigestion.

It starts with the first words of the headline: "ConAgra Foods Lowers Near-Term EPS Outlook"

CEO Gary Rodkin then says (emphasis by me), "We are intensely focused on improving our business. It is taking longer than expected to stabilize the performance of the Private Brands segment, which has been below plan because of pricing, sales force coverage, and customer service issues largely resulting from restructuring actions taken before we bought that business last year."

He goes on to say: "We view these as near-term issues only, and remain fully confident in our private brands strategy and the growth opportunities resulting from the recent acquisition of Ralcorp."

He had better say that, but by conceding "longer than expected" he's conceding the deal isn't working out as expected.

Which is why I wondered if Ralcorp had been a big short-interest stock. I can't tell you the number of times a company with big short interest gets acquired, only to implode once the deal is done. Mattel's (MAT) purchase of The Learning Co. and Medtronic's (MDT) acquisition of Arterial Vascular Devices are among the legendary classics.

Reality: The good news here is that ConAgra isn't ducking that it has issues. It's sugar-coating it by saying it's a near-term situation that will resolve itself by the end of the year. Maybe it will, maybe it won't, but rarely do you see a company announce, in its headlines, that it's cutting guidance. Of course, ConAgra also trumpets "strong" results in earnings headlines when results are, indeed, good. Live by the tout, die by the tout. At least they're consistent.

-- Written by Herb Greenberg in San Diego

Herb Greenberg, editor of Herb Greenberg's Reality Check, is a contributor to CNBC. He does not own shares, short or trade shares in an individual corporate security. He can be reached at herbonthestreet@thestreet.com.

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