ConAgra Foods announced Wednesday it will spin off its Lamb Weston frozen potato products unit, continuing its aggressive restructuring amid mounting challenges in the food industry.
Lamb Weston will become a separate public company consisting of ConAgra’s frozen potato, sweet potato, appetizers and other vegetable products businesses. The remaining businesses will be renamed Conagra Brands and will include brands like Marie Callender’s, Hunt’s, Reddi-wip, Slim Jim, PAM, Chef Boyardee, Orville Redenbacher’s, P.F. Chang’s and Healthy Choice.
“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,” ConAgra’s chief executive Sean Connolly said in a news 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,” he added.
The businesses forming Conagra Brands had combined sales of about $9 billion in the year ended May, while Lamb Weston generated about $2.9 billion.
ConAgra is “among an array of big U.S. food companies grappling with slowing growth as many consumers eschew traditional packaged foods for less-processed and fresher fare,” according to The Wall Street Journal.
Connolly, who took over as CEO in April, has been under pressure to improve results from activist investor Jana Partners LLC. Earlier this month, ConAgra agreed to sell its private-label unit to TreeHouse Foods for $2.7 billion so it could focus more on its portfolio of branded products.
Connolly told Reuters the Lamb Weston spinoff would give the resulting two companies more focus and individual management attention.
“You don’t have each business competing for the same resources if you’re a stand-alone,” he explained.
Immediately following the transaction, which is expected to be completed in the fall of 2016, ConAgra Foods shareholders would own shares of both independent companies. JPMorgan analyst Ken Goldman said in a note that future ConAgra divestitures could include the company’s commercial foods segment.