With activist investor Jana Partners’ June 17 disclosure that it has accumulated more than 7.2% of ConAgra Foods stock (a $540 million stake of 31 million shares), the Omaha, Nebraska, USA-headquartered company announced the following day that it will open discussions with representatives from the New York-based hedge fund after fourth-quarter earnings results are posted on June 30.
Reports from Wall Street say that Jana is calling for a strategic review and capital allocation changes at ConAgra, as well as the need for new board members. Capitalized at $18.52 billion, the diversified packaged foods company’s major frozen brands sold in retail stores include Healthy Choice, Marie Callender’s, P.F. Chang’s and Banquet and in its consumer foods division. Frozen potato products supplier Lamb Weston is the star player in its commercial foods segment. A third division, dedicated to private label product sales, has been a drag on the company since its acquisition of Ralcorp in 2013.
According by analysis by Andrew Sebastian published at the Insider Monkey finance website (www.insidermonkey.com) on June 19: “Jana was moved to take a position after ConAgra took a $1.3 billion impairment charge related to its (Ralcorp) acquisition. Jana will likely push for the nomination of Rosenstein, Brad Alford (former ceo of Nestle USA), and James Lawrence (former chairman of Rothschild and cfo of Unilever and General Mills) to ConAgra’s board with the hopes of driving change at the company and modifying ConAgra’s capital allocation policies. ConAgra’s stock jumped 10% on the news and any changes pushed by Jana could potentially push the stock even higher in the future.”
Deutsche Bank has estimated that ConAgra’s sum-of-parts valuation would be $47 per share if the company were to be broken up. The stock price closed at $43.37 on Friday, before slipping a bit to $42.82 in after hours trading.
Commenting further in the Insider Monkey post, Sebastian opined: “If this valuation is approximately right, a spin-off or any sale of assets could lead to an 8% appreciation on top of the 10% pop. A split of the company would most likely be between its proprietary brands and private label business, which was mostly brought on through the acquisition of Ralcorp…”
It is believed that any plan to break up ConAgra Foods will be resisted by the company’s current board of directors and management team, which has underscored its commitment to act in the “best interests of all shareholders” while welcoming shareholder engagement.
Meanwhile, the board of directors has amended company bylaws to extend from June 21 to July 8 the deadline for submission by shareholders of nominees for election to the board during the annual meeting in September.
