Sean Connolly, president and chief executive officer, ConAgra Foods
Conagra Foods plans Lamb Weston spin-off
ConAgra Foods, Inc. (NYSE: CAG) today announced plans to pursue the separation of the Company into two independent public companies: one comprising its robust consumer portfolio of diverse and leading brands and the other comprising its market leading foodservice portfolio of innovative frozen potato products.
The consumer brands business will be renamed Conagra Brands, Inc. (“Conagra Brands”) and the frozen potato business will operate under the Lamb Weston name. Immediately following the transaction, which is expected to be completed in the fall of 2016, ConAgra Foods shareholders will own shares of both independent companies.
The transaction is expected to be structured as a spin-off of the Lamb Weston business, tax-free to the Company and its shareholders.
Sean Connolly, president and chief executive officer, ConAgra Foods:
“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.”The two businesses operate in distinct markets and possess unique and compelling growth prospects and investment requirements. In addition, ConAgra Foods believes that the separation will result in other material benefits to the standalone companies, including:
“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 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. We are confident that this separation will best position each company to compete and win while creating compelling long-term value for shareholders and delivering benefits to employees, customers and other key stakeholders.”
- Greater management focus on the distinct businesses of consumer brands and foodservice frozen potato products;
- Increased flexibility, agility and resources to capitalize on their respective long-term opportunities and growth strategies;
- Tailored capital structures and financial policies and targets appropriate for each company’s unique business profile; and
- The ability for investors to value the two companies based on their particular operational and financial characteristics and invest accordingly.
Conagra Brands
Conagra Brands will be comprised primarily of the operations currently reported as the Company’s Consumer Foods segment, which generated approximately $7.2 billion in fiscal 2015 revenues, as reported. The Consumer Foods segment consists of popular leading brands 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.
Conagra Brands is also expected to include several businesses currently reported within the Commercial Foods segment, including the traditional foodservice business (sales of branded products to foodservice companies), Spicetec Flavors & Seasonings and JM Swank, as well as certain private label operations which were moved to the Consumer Foods reporting segment in the first quarter of fiscal 2016. These businesses generated approximately $1.8 billion in fiscal 2015 revenues, as reported. Conagra Brands is also expected to retain the Company’s stake in the Ardent Mills joint venture.
Some of the Conagra Foods Brands
Conagra Brands will be led by CEO Sean Connolly and will be headquartered in Chicago.
Lamb Weston
Following the separation, Lamb Weston’s portfolio will consist of frozen potato, sweet potato, appetizer and other vegetable products, as well as a continued presence in retail frozen products under licensed brands and private brands. For fiscal 2015, Lamb Weston generated revenues of approximately $2.9 billion, as reported, and accounted for the significant majority of the Commercial Foods segment’s fiscal 2015 operating profit of approximately $570 million.
The recently updated Lamb Weston logo
Capital structure and capital allocation policy for Lamb Weston have not yet been finalized. The Lamb Weston management team will be announced at a later date.