ConAgra announces Lamb Weston spinoff
Nov. 18, 2015
by Keith Nunes
When the break up is completed, ConAgra Brands will feature such brands as Marie Callender’s, Hunt’s, Reddi-wip, Slim Jim, Pam, Chef Boyardee, Orville Redenbacher’s, P.F. Chang’s and Healthy Choice.
OMAHA – ConAgra Foods, Inc. plans to break up the company into two independent, publicly traded businesses. One will be called ConAgra Brands to be made up of the ConAgra Foods’ consumer brands business, and the other will be called Lamb Weston and be comprised of ConAgra Foods’ frozen potato assets.
“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, president and CEO of ConAgra Foods. “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.”
The two businesses operate in distinct markets and possess unique and compelling growth prospects and investment requirements, according to the company. A break up of the businesses will allow for greater management focus on each business, increased flexibility, tailored capital structures and financial policies, and the ability for investors to value the two companies based on their individual operational and financial characteristics.
When the break up is completed, ConAgra Brands is expected to have approximately $7.2 billion in sales and feature such brands as Marie Callender’s, Hunt’s, Reddi-wip, Slim Jim, Pam, Chef Boyardee, Orville Redenbacher’s, P.F. Chang’s and Healthy Choice. The business also is expected to include several businesses that are included in the company’s Commercial Foods business unit, including Spicetec Flavors & Seasonings and JM Swank. ConAgra Brands is also expected to retain the company’s stake in the Ardent Mills joint venture.
Lamb Weston will be comprised of ConAgra Foods’ frozen potato assets with sales of $2.9 billion.
ConAgra Brands will be led by Connolly and headquartered in Chicago.
The Lamb Weston business will have approximately $2.9 billion in sales once the break up is completed. The business features ConAgra’s portfolio of frozen potato products primarily intended for the food service industry, and will include ConAgra’s interests in several joint ventures, including Lamb Weston / Meijer in Europe. Where the business will be headquartered and who will lead it will be announced at a later date.
The company’s joint ventures also include a 44 percent stake in Ardent Mills, formed in 2014 as a combination of Horizon Milling LLC, a Cargill-CHS joint venture, and ConAgra Mills. Ardent Mills is the largest flour milling company in the United States. Cargill also owns 44 percent of Ardent Mills while CHS owns the remaining 12 percent. No specific mention of Ardent Mills was included in the announcement about the company breakup. The origins of ConAgra Foods are in flour milling. The company was incorporated in 1922 as Nebraska Consolidated Mills. The company was renamed ConAgra Inc. in 1971 and acquired Lamb Weston in 1988.
The transaction is expected to be completed in the fall of 2016, and it is expected to be structured as a spin-off of the Lamb Weston business. ConAgra Foods shareholders will own shares of both independent companies.
Since taking over as CEO of ConAgra Foods in April, Connolly has initiated several dramatic changes. In October, the company announced it was laying off 1,500 employees and moving its headquarters to Chicago. In November, the company announced plans to sell its Private Brands business unit to TreeHouse Foods for approximately $2.7 billion.