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How ConAgra Expects to Maximize Value through Its Spin-Off

How ConAgra Foods Continued to Drive Profitability in Fiscal 3Q16

(Continued from Prior Part)

Two independent public companies

In November 2015, ConAgra Foods (CAG) announced its plan to separate into two independent public companies. In its fiscal 3Q16 earnings call, the company mentioned that it was on track for the completion of the separation of ConAgra into two public companies in fall 2016.

CAG’s management believes that the separation of ConAgra Brands and Lamb Weston will maximize value. Management expects shareholders to gain from higher operating performance and more consistency from each business following the separation.

As mentioned in CAG’s press release, one company will include its robust consumer portfolio of diverse and leading brands. The other company will include its market-leading food service portfolio of innovative frozen potato products.

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The consumer brands business will operate under ConAgra Brands. The frozen potato business will operate under Lamb Weston. The motive behind the spin-off is to enable both brands to operate as vibrant, pure-play companies with improved strategic focus and flexibility.

Where is the efficiency plan heading?

Soon after its fiscal 1Q16 earnings, ConAgra announced that it would benefit from a $300 million efficiency plan within the next three years, primarily within the consumer segment. Management announced that it intended to build ConAgra into a leaner, more focused company.

CAG expects to realize the majority of its efficiency plan in fiscal 2017 and 2018. The efficiency plan is projected to improve profitability, advance the company’s growth agenda, and unlock shareholder value.

ConAgra also mentioned that it remains on track in relocating its entire consumer foods team under one roof in its new corporate headquarters in Chicago. This will help it to retain top talent and focus on brand building and innovation.

ConAgra’s main competitors are the J.M. Smucker Company (SJM), Bunge (BG), and Flowers Foods (FLO). They’ve returned 3.6%, -17.7%, and -13.7%, respectively, so far in 2016. The iShares S&P MidCap 400 Value ETF (IJJ) invests 0.6% of its portfolio in FLO.

Continue to Next Part

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