OMAHA, NEBRASKA, U.S. — Bringing clarity to an earlier announcement about the future of its joint ventures, the 44% stake in Ardent Mills owned by ConAgra Foods, Inc. will be part of ConAgra Brands rather than Lamb Weston as part of the planned split of ConAgra Foods into two separate publicly traded companies.
ConAgra Foods is planning to break up the company into two independent, publicly traded businesses — one to be called ConAgra Brands and to be made up of the ConAgra Foods’ consumer brands business, and the other to be named Lamb Weston, including ConAgra Foods’ frozen potato assets.
During a conference call with investment analysts Nov. 18, Sean Connolly, president and chief executive officer of ConAgra Foods, Inc., discussed plans for ConAgra’s milling company stake. Ardent Mills, formed in 2014 by combining the milling assets of ConAgra and Horizon Milling LLC, is the largest flour milling company in the U.S.
“ConAgra Brands will also include several businesses that have a strong connection to our existing retail business — the traditional food service business, currently part of our Commercial Foods segment; and select private label operations we’re retaining in the pending sale of private brands,” he said. “ConAgra Brands will also retain SpiceTec Flavors & Seasonings, JM Swank, and the interest in our Ardent Mills joint venture.”
“On a pro forma basis, the business that will create ConAgra Brands accounted for about $9 billion in our reported fiscal 2015 revenue,” Connolly said. “This figure excludes any contribution from Ardent Mills, which, as a reminder, is unconsolidated. Following the separation, ConAgra Brands expects to maintain an investment grade credit profile and remain committed to a strong and attractive dividend.”
In its initial announcement earlier Nov. 18, ConAgra said the Lamb Weston potato business, which will have approximately $2.9 billion in sales once the break up is completed, “will include ConAgra’s interests in several joint ventures.” No specific mention of Ardent Mills was made in the earlier announcement.
Going forward, the company is planning to host investor days for each entity, just prior to the spin-off, said John Gehring, executive vice-president and chief financial officer.
Connolly said the decision to split ConAgra into two publicly traded companies was consistent with his earlier statements declaring the company would consider all options in staking out a path toward improved investment returns for shareholders.
“As I’ve stated before, our philosophy includes maintaining an open mind toward any actionable pathway that maximizes value for shareholders,” he said. “We have explored and thoroughly evaluated alternative pathways, analyzing value creation potential as well as viability. We are firm in our belief that the separation of ConAgra Foods into two pure-play companies is the best pathway forward. Our rationale in making this decision is clear: ConAgra Brands and Lamb Weston will be two separate vibrant, pure-play companies with enhanced strategic focus and flexibility.”
He suggested the perception of the two businesses in the investment may be better going forward.
“Separating the businesses will also create greater transparency into the unique drivers of performance across our consumer and commercial businesses today, providing investors with the ability to value the two companies based on their specific operational and financial characteristics and invest accordingly,” he said. “In addition to investors, we are confident that customers and employees will benefit from the separation as the two companies sharpen their focus and execute their distinct strategies.”