ConAgra buys Unilever's frozen food business

The packaged food company continues with its acquisition spree.

By Zacks.com Aug 3, 2012 12:13PM

Image: Woman and refrigerator (© Photos.com/Jupiterimages)By Zacks Equity Research
      

ConAgra Foods (CAG) recently announced a deal with Unilever Plc (UL) to take over its North American frozen meal business. ConAgra paid out $265 million for the takeover and added the premium Bertolli and P.F. Chang's brands to its frozen foods portfolio.


The deal marks the fifth acquisition for the company within a year, following on the heels of the purchase of National Pretzel Company, Del Monte Canada, Odom's Tennessee Pride and Kangaroo Brands. 


This divestiture is consistent with Unilever's strategy of exiting from its global frozen foods business. The company agreed to sell the licensing rights of its Bertolli and P.F. Chang's brands to ConAgra Foods. However, Unilever will retain the Bertolli trademark and intends to continue its existing pasta sauce business at its Kentucky manufacturing site. Also, the Owensboro production facility of Unilever, where the Bertolli and P.F. Chang frozen meals are made, will not be transferred to ConAgra.


These frozen meal brands generated about $300 million in sales in 2011 for Unilever. ConAgra believes the acquisition will further its expansion plans and boost its product portfolio.


ConAgra Foods reported a fourth-quarter 2012 loss per share from continuing operations of 21 cents, down from earnings per share of 61 cents reported a year ago. The food maker believes that the deal will not affect the company's fiscal 2013 goal of 6% to 8% earnings growth from $1.84 per share earned in fiscal 2012.


ConAgra Foods, based in Omaha, Neb., is one of North America's leading food companies, serving grocery retailers, restaurants and other food-service establishments, with brands in 97% of America's households. The company primarily competes with HJ Heinz Co. (HNZ) and Kraft Foods Inc. (KFT). Unilever, based in the Netherlands, is a massive consumer products company with goods ranging from Degree deodorant to Ragu pasta sauce.


We have a "neutral" recommendation on ConAgra over the long term. ConAgra has a Zacks No. 2 rank, implying a short-term (one to three months) "buy" rating.


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