Wednesday, July 16, 2014

ConAgra Acquires TaiMei Potato for $93M, Extends Global Footprint

Food products company ConAgra Foods, Inc. (CAG) recently acquired TaiMei Potato Industry Limited, a potato processor in Shangdu, Inner Mongolia. Valued at $93 million, the acquisition is in line with ConAgra’s international expansion strategy.

TaiMei Potato Industry complements ConAgra’s Lamb Weston potato business, which produces varieties of sweet potato, frozen potato, appetizer and other vegetable products. The Lamb Weston potato business has been serving more than 100 countries over the past 60 years.

With the acquisition, ConAgra will own its first potato-processing facility in China. TaiMei will aid the company in tapping the growth opportunities in Asia. All 340 employees of the Chinese facility will continue working with the company under the payrolls of ConAgra.

The funds for the transaction will not affect ConAgra’s debt reduction plans. The company intends to repay $1 billion debt in fiscal 2015 in order to strengthen its balance sheet.

ConAgra reported disappointing results for the fourth quarter of fiscal 2014, with 8% year over year reduction in adjusted earnings to 55 cents per share. Moreover, quarterly sales declined 2% year over year to $4,436.8 million. However, the Lamb Weston potato business witnessed a rise in sales. In the coming quarters, ConAgra expects to record an improvement in all the business segments, along with synergies from the Ralcorp acquisition.

With a market capitalization of $13 billion, ConAgra holds a Zacks Rank #5 (Strong Sell). Some better-ranked stocks in the industry include The Hain Celestial Group, Inc. (HAIN), Treehouse Foods, Inc. (THS) and Pinnacle Foods Inc. (PF). While The Hain Celestial Group and Treehouse Foods sport a Zacks Rank #1 (Strong Buy), Pinnacle Foods holds a Zacks Rank #2 (Buy).

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