Conagra Brands, Inc. CAG has inked a definitive agreement with Utz Quality Foods, LLC to sell its Direct Store Delivery (“DSD”) snacks business. The deal is subject to customary closing conditions and expected to be concluded within 2019.
Following the divestiture, brands like Tim's Cascade Snacks, Hawaiian Snacks, Erin's, Snyder of Berlin and Husman's will be added to Utz’s Quality Foods’ portfolio. However, Conagra didn’t reveal any financial conditions related to the agreement.
Notably, DSD snacks business became a part of Conagra’s portfolio when the company acquired Pinnacle Foods in October 2018. Conagra is on track with the integration process of the buyout as well as realizing synergies from the same. In fact, the acquisition boosted the company’s fourth-quarter fiscal 2019 net sales, which rallied 32.9% year over year. Going ahead, management expects the acquisition to remain accretive to Conagra’s results.
Coming back to the news, this divestiture is in sync with the company’s efforts to reshape its portfolio. Considering this, the company is acquiring high-margin generating businesses and divesting the less-profitable ones.
In this regard, the company had earlier exited private label brands and non-key businesses that include Spicetec and JM Swank. It also executed Lamb Weston’s LW spin-off in 2016. Conagra has recently completed the divestiture of its Wesson oil brand to Richardson International. Moreover, the company concluded the sale of its Canadian Del Monte processed fruit and vegetable business to Bonduelle Group during the first quarter of fiscal 2019. These endeavors are expected to facilitate Conagra’s transformation into a pure-play branded food company.
Buoyed by such well-chalked initiatives, shares of this Zacks Rank #2 (Buy) company have rallied 28% in the past six months compared with the industry’s growth of 11.5%.
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