ConAgra Foods, Inc. has announced in a press release that it will be splitting the company into two independent public companies.
The split will allow the two businesses to be more focused and operate on their respective markets and capitalize on their long-term growth opportunities.
ConAgra said in the press release that one brand, which will be named ConAgra Brands, Inc., will comprise of the company's robust consumer portfolio of diverse and leading brands.
The other brand, which will operate under the Lamb Weston name, will comprise of the company's leading foodservice portfolio of innovative frozen potato products.
Sean Connolly, the president and CEO of ConAgra, said in the press release that their decision to split into two companies reflect ConAgra's "commitment to implementing bold changes in order to deliver sustainable growth and enhanced shareholder value."
"We carefully considered a variety of strategic alternatives, and believe that the separation of our Lamb Weston specialty potato business from our consumer brands business is the best way to drive shareholder value," he said.
Connolly adds in the press release that the separation allows the two companies to enhance their "strategic focus and provide flexibility to capitalize on the unique growth opportunities in its respective markets."
He said that shareholders will be exposed to a more "consumer and commercial foods business" that has their own "customer base and investment profile."
ConAgra said in the press release that they expect to complete the transaction in the fall of 2016 and is also expected to be tax-free to shareholders.
The Wall Street Journal adds that ConAgra, though, is still struggling to justify the split of the two companies.
The two companies are already operating at separately managed divisions.
The Wall Street Journal adds that the commercial foods segment, which the frozen potatoes are part of, is not exactly performing outside expectations, even if it's outpacing its consumer brands counterpart.
Commercial foods sales rose just 3.5 percent in the recent quarter, compared to a 0.3 percent decline for consumer brands.
The Wall Street Journal adds that consumer foods operating margins were slightly higher at 14.6 percent, compared to 12.6 percent for commercial foods.
The data shows that ConAgra Brands is consistent with the idea that it will be a slower-growing entity that is focused more on margin expansion.
The Wall Street Journal adds that it still isn't clear if one business will trade significantly higher than the other.
Its latest move leaves investors with a bland taste.
