ConAgra to Split in Two in Victory for Activist Investors
ConAgra Foods (CAG) - Get Report continues to slim down, as the the Omaha, Neb.-based food conglomerate announced Wednesday, Nov. 18, it will split into two separate publicly traded companies.
One of the spun off entities will consist of ConAgra's branded food business, to be named Conagra Brands, and will be based in Chicago. The division accounted for fiscal 2015 revenue of $7.2 billion.
The other will be comprised of its frozen potato food service unit operated under the Lamb Weston name. It generated fiscal 2015 revenue of $2.9 billion while contributing most of the unit's $570 million in operating profit during that time period.
The move, to be structured as a tax-free spin-off, follows the sale of ConAgra's private label food business toTreehouse Foods (THS) - Get Report for $2.7 billion in early November.
The food producer's stock was up almost 4% in Wednesday trading, pegged at around $41 per share.
Shareholders of ConAgra will receive shares in the two pure-play companies after the spinoff is completed, which is expected to occur in the fall of 2016.
"The decision to separate into two pure-play companies reflects our ongoing commitment to implementing bold changes in order to deliver sustainable growth and enhanced shareholder value," said Sean Connolly, CEO of ConAgra, in a statement.
He said the company carefully considered a variety of strategic alternatives.
"The separation will enable each company to sharpen its strategic focus and provide flexibility to capitalize on the unique growth opportunities in its respective market," he added.
Over the past year ConAgra has been under pressure from Barry Rosenstein's Jana Partners to take actions to reverse a decline in financial performance following its January 2013 acquisition of Ralcorp Holdings for $6.8 billion, such as streamlining its portfolio. Jana was threatening a proxy contest in late spring.
Conagra Brands, according to the company, will consist of branded products such as Marie Callender's, Hunt's, Ro*Tel, Reddi-Wip, Slim Jim, Pam, Chef Boyardee, Orville Redenbacher's, P.F. Chang's and Healthy Choice.
The unit will include the branded portion of the food service business as well as Spicetec Flavors & Seasonings, J.M. Swank and the company's stake in the Ardent Mills joint venture. It will be led by Connolly.
Meanwhile, Lamb Weston's business will be comprised of frozen potato, sweet potato, appetizer and other vegetable products, as well as frozen products under licensed brands and private brands.
The frozen potato unit has interests in several joint ventures, including Lamb Weston and Meijer in Europe.
Goldman Sachs and Centerview Partners provided financial advice to ConAgra, while Jones Day and Davis Polk & Wardwell provided legal advice.