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ConAgra Buys Unilever's "Frozen" Biz

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

The recent acquisition marks the fifth acquisition for the company within a year and is on the heels of the purchase of National Pretzel Company, Del Monte Canada, Odom's Tennessee Pride and Kangaroo Brands. The deal is expected to close in third quarter 2012.

This divestiture is consistent with Unilever’s strategy of exiting from its global frozen foods business. Aimed at this, Unilever has agreed to sell the licensing rights of its Bertolli and P.F. Chang's brands to ConAgra Foods.

Worth mentioning is the fact that these frozen meal brands generated about $300 million in sales in 2011 for Unilever. ConAgra believes this acquisition to strengthen its business expansion targets and further boost product portfolio.

However, Unilever will retain the Bertolli trademark and intend to continue its existing pasta sauce business at Kentucky manufacturing site. Also, the Owensboro production facility of Unilever will not be transferred to ConAgra due to the above sell-off.

ConAgra Foods Inc. reported fourth-quarter 2012 loss per share from continuing operations of 21 cents (as reported), down from earnings per share of 61 cents reported a year ago. The food maker believes that the above 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.

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

We have a Neutral recommendation on ConAgra over the long term. Also, ConAgra has a Zacks #2 Rank, implying a short-term (1-3 months) Buy rating.

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