ConAgra Foods, one of the largest packaged food companies in North America, announced plans to split the business into two independent pure-play companies by the fall of 2016. The first company will continue with ConAgra Foods’ diversified portfolio of brands and will be renamed Conagra Brands Inc., while the second company will operate the group’s frozen potato business consisting of frozen potato, sweet potato, appetizer, and other vegetable products under the name Lamb Weston.
The Conagra Brands business will be headquartered in Chicago, Illinois, will be headed by CEO Sean Connolly, and will consist of the operations that are currently reported under the company’s Consumer Foods unit, including popular brands such as Marie Calender’s, Hunt’s, RO*TEL, Reddi-wip, Slim Jim, PAM, Chef Boyardee, Orville Redenbacher’s, P.F. Chang’s and Health Choice, which generated approximately $7.2 billion in revenues in fiscal year 2015. The new business will also include businesses currently reporting under the Commercial Foods unit including the foodservice business, certain private label operations, and the Spicetec Flavors & Seasonings and JM Swank lines, which combined generated approximately $1.8 billion in revenues in fiscal year 2015. Conagra Brands will also retain Con Agra’s stake in the Ardent Mills joint venture.
“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,” said Sean Connolly, president and chief executive officer of ConAgra Foods in a company press release. “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. Shareholders will gain direct exposure to more focused consumer and commercial foods businesses, each with distinct customer bases and investment profiles.”
Lamb Weston is a leading supplier of frozen potato products to the global foodservice industry, and will continue to grow its reach in the retail sector of frozen licensed and private brands. Lamb Weston’s joint venture interests including the Lamb Weston/Meijer venture in Europe will remain in place following the separation and will play a key role in driving future growth for the business as it seeks to expand geographically, and particularly in emerging markets. Lamb Weston generated revenues of $2.9 billion, and was responsible for the bulk of the $570 million in operating profits posted by the Commercial Foods segment in fiscal year 2015.
The separation will be tax-free to ConAgra shareholders, and is expected to increase each business’ flexibility in meeting their long-term growth goals, create custom capital structures and policies that are designed to the best advantage of each company’s business profile, enable management to focus on each distinct business, and enable investors to make more focused investment decisions based on each company’s distinct operations.