ConAgra Foods Inc. filed paperwork to spin off its Lamb Weston food-service business, moving ahead with the latest step in the transformation of the maker of Hunt’s ketchup and Chef Boyardee pasta.
Thomas Werner, president of ConAgra’s commercial-foods unit, will become chief executive officer of Lamb Weston when the separation is completed, which is expected by this fall, the Chicago-based company said Wednesday in a statement. ConAgra board member Timothy McLevish will become Lamb Weston’s executive chairman.
ConAgra CEO Sean Connolly, 50, has overhauled the food company since taking the helm last year. Facing activist pressure, Connolly shed the struggling private-label business, unwinding a merger that was less than three years old and had weighed on profit. He also sold off a spices-and-flavors business for $340 million to focus on ConAgra’s well-known consumer brands.
The spinoff of Lamb Weston, which provides french fries to fast-food chains including McDonald’s and KFC, is expected to be tax-free to shareholders, the company said Wednesday. ConAgra recently moved its headquarters to Chicago from Omaha, Nebraska, and will be renamed Conagra Brands Inc. after the split.
ConAgra shares rose as much as 1 percent to $48.18 in New York. The stock had gained 13 percent this year through the close of trading Tuesday.
Spinning off Lamb Weston, which generated about $2.9 billion in revenue in ConAgra’s fiscal 2015, will add pressure on the remaining company to boost sales of its consumer products. One of the main investor concerns about the company is that its portfolio -- including Peter Pan peanut butter, Swiss Miss cocoa and Banquet frozen meals -- is mostly made up of second-tier names that risk losing sales to cheaper private-label products.
Sales in ConAgra’s consumer foods unit fell 4.5 percent in the recently completed fiscal year, including a 12 percent decline in the fourth quarter. Connolly is seeking to reduce annual costs by $300 million over the next few years to improve the company’s margins.