ConAgra Foods plans to split into two independent public companies

ConAgra Foods plans to split itself into two separate public entities; one consisting of its consumer portfolio, and the other comprising a foodservice portfolio of frozen potato products.

The consumer business will be branded as Conagra Brands, Inc, and the frozen potato business will operate under Lamb Weston.

The split is expected to be completed in the fall of 2016.

Expected to be structured as a spin-off to the Lamb Weston business, it will be tax-seperate both to the company and its shareholders, who will own shares of both the entities.

ConAgra Foods CEO and president Sean Connolly said: "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.

"We carefully considered a variety of strategic alternatives, and believe that the separation of our Lamb Weston specialty potato business from our consumer brands business is the best way to drive shareholder value. The separation will enable each company to sharpen its strategic focus and provide flexibility to capitalise on the unique growth opportunities in its respective market."

ConAgra Foods expects the split to provide other material benefits to individual companies, such as greater management focus on standalone companies; greater flexibility to capitalise on long-term opportunities; and the ability for investors to value and invest in the two companies based on individual operational and financial performances.

Conagra Brands will include most of the operations currently reported as the Consumer Foods segment and will feature leading brands, namely Marie Callender’s, Hunt’s, RO*TEL, Reddi-wip, Slim Jim, PAM, Chef Boyardee, Orville Redenbacher’s, PF Chang’s, and Healthy Choice.

Consumer Foods segment reported revenues of approximately $7.2bn in fiscal 2015.

Conagra Brands will also include several businesses currently operating under the Commercial Foods segment, which comprises the traditional foodservice business (sales of branded products to foodservice companies), Spicetec Flavors & Seasonings, JM Swank, and some private label operations. These businesses, which generated revenues of approximately $1.8bn in fiscal 2015, will be moved under the Consumer Foods segment in the first quarter of fiscal 2016.

The company’s stake in the Ardent Mills joint-venture is likely to remain with Conagra Brands.

Conagra Brands will be led by CEO Sean Connolly and will be headquartered in Chicago.

Lamb Weston’s portfolio will include frozen potato, sweet potato, appetizer and other vegetable products, and retail frozen products under licensed brands as well as private label.

For fiscal 2015, Lamb Weston reported revenues of approximately $2.9bn.

Following the split, the Lamb Weston entity will retain the firm’s interests in several joint-ventures, including Lamb Weston / Meijer in Europe.

The company is yet to decide on the capital structure and capital allocation policy for Lamb Weston. The management team for Lamb Weston will be announced later.

Goldman Sachs and Centerview Partners are serving as financial advisors, and Jones Day and Davis Polk & Wardwell LLP are serving as legal advisors to ConAgra Foods.

Meanwhile, ConAgra Foods plans to use the proceeds from the sale of its Private Brands business, which is still pending, to cut debt.

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Image: ConAgra Foods’ frozen potato business will operate under Lamb Weston. Photo: courtesy of phasinphoto/FreeDigitalPhotos.net.