ConAgra Foods plans to sell the struggling private-brands operations that it bought less than three years ago, bowing to pressure from activist investor Jana Partners.
The business is being sold because turning it around represents a “suboptimal use” of ConAgra’s resources, chief executive officer Sean Connolly said in a statement. The company will release operating details of its plans and long-term financial expectations at an investor event later this year, he said.
ConAgra, which owns the Chef Boyardee and Healthy Choice brands, has struggled with slumping sales and profit following its $6.7-billion acquisition of private-label food producer Ralcorp Holdings in 2013. Jana Partners, a hedge fund founded by Barry Rosenstein, disclosed a 7.2-per-cent stake in ConAgra this month and threatened to nominate three directors.
Jana has said that it started amassing the stake after ConAgra wrote down the Ralcorp deal by $1.3 billion in March. Before the Ralcorp acquisition, ConAgra was focused on packaged foods with well-known brand names. Its line-up includes Hunt’s ketchup, Swiss Miss cocoa and Orville Redenbacher’s popcorn.
The deal was a bet that Ralcorp’s faster-growing private-label business, which sells supermarket brands, would be a good fit for the company. Instead, ConAgra struggled to combine the two businesses. Jana wanted ConAgra to review its strategy and corporate structure, examine its costs and better manage how it allocates capital.
Former chief executive officer Gary Rodkin, who orchestrated the Ralcorp deal, announced last year that he would step down and was replaced by Connolly, who officially took the reins in April. He previously led Hillshire Brands and abandoned an unpopular deal to buy Pinnacle Foods during his tenure there.
News by Bloomberg, edited by ESM
