ConAgra Foods dropped the most in more than a year, after writing down its private-label food business by $1.95 billion, the second time this year that the company has cut the value of the unit that it’s trying to sell.
The most recent impairment charge reduced first-quarter profit by $3.23 a share, the Nebraska-based company said in a statement. ConAgra wrote down the value of the business by $1.3 billion in March.
In June, ConAgra said that it would sell the division, acquired from Ralcorp for $6.7 billion in 2013, to focus on its better-performing brand-name businesses, which include Healthy Choice meals, Swiss Miss cocoa and Orville Redenbacher’s popcorn. Because of the unit’s lacklustre performance, analysts have said that it’s a likely target for private-equity buyers, rather than other food companies.
"The announcement of a further $1.95-billion impairment charge for the troubled private-brands business seems to have disappointed investors, based on the idea that this signals that the deal value may be substantially lower than investors were expecting," Alexia Howard, an analyst at Sanford C. Bernstein & Co., said in a note.
ConAgra fell 7.1 per cent to $39.40 at the close in New York, the biggest one-day drop since June 2014. The shares have climbed 8.6 per cent this year, with much of the gain coming after the company announced plans to sell the private-label business.
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