ConAgra Foods Inc., which has responded to growing challenges in the food sector with aggressive restructuring this year, has unveiled plans to split into two independent public companies.
One of the companies will house the consumer-brands business and will be renamed Conagra Brands, Inc. The second company will be named Lamb Weston and will produce ConAgra’s frozen potato products.
The moves, which will be structured as a spinoff of the Lamb Weston business, are expected to be completed by the endof 2016, the company said in a press release. Once the transaction is done, shareholders of ConAgra will own stock in both new companies.
“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,” said ConAgra CEO Sean Connolly. “Shareholders will gain direct exposure to more focused consumer and commercial foods businesses, each with distinct customer bases and investment profiles.”
Conagra Brands will be made up mostly of the company’s current consumer foods segment, which generated about $7.2 billion in fiscal 2015 revenues. The business includes 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.
The new company is also slated to include businesses reported in the commercial foods segment that generated about $1.8 billion in revenue.
Lamb Weston will consist of frozen potato, sweet potato, appetizer and other vegetable products as well as a continued presence in frozen retail products under both licensed and private brands. In 2015, those businesses earned about $2.9 billion in revenue.
ConAgra is among a number of large U.S. food manufacturers grappling with slowing growth as many consumers eschew traditional packaged foods for less processed, fresher fare.
Connolly took the helm at ConAgra in April amid unrelenting weak sales and a botched acquisition of private-label business Ralcorp Holdings Inc. Connolly also began facing pressure to improve results from activist investor Jana Partners LLC, which revealed in June that it had built a larger than 7 percent stake in ConAgra.
In June, Connolly announced plans to shed ConAgra’s unit that makes food for supermarket brands. He followed those moves with further plans to cut about 1,500 office jobs and move headquarters to Chicago as part of an effort to trim $300 million from the company’s annual budget.
The company identified the cost savings through zero-based budgeting, a tool increasingly adopted by big U.S. food makers that requires departments to justify their expenses each year.
Source: The Wall Street Journal