ConAgra Buying Unilever North America Frozen-Meals Unit for $265 Million
07/30/2012| 05:11pm US/Eastern
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--ConAgra agrees to buy Unilever's North America frozen-meals business for $265 million
--Unit has about $300 million in annual sales; sells Bertolli and P.F. Chang's frozen meals
--ConAgra's fifth deal in past year expands its presence in frozen-food aisle
(Adds background on frozen-food space and comments from ConAgra executive, updates shares, in the fourth through 10th and 14th paragraphs.)
By Paul Ziobro
ConAgra Foods Inc. (>> ConAgra Foods, Inc.) is broadening its offerings in the frozen-food aisle with an agreement to buy Unilever PLC's (>> Unilever N.V.) frozen-meals businesses in North America, which sells items under the Bertolli and P.F. Chang's brands, for $265 million.
The business has nearly $300 million in annual sales.
The acquisition, expected to close within 60 days, would be the fifth by ConAgra over the past year as it tries to find growth in the struggling packaged-food space. ConAgra, in seeking to deploy its cash, has been looking for deals in categories where it already sells goods in the private-label space and internationally. The deals have come after ConAgra failed in its bid to buy Ralcorp Holdings Inc. (>> Ralcorp Holdings, Inc.) for $5.2 billion in September.
With its latest deal, ConAgra is getting bigger in a category that has exhibited struggles of late and has caused one packaged-food company to retreat. Consumers have shown they are particularly sensitive to higher prices on frozen meals, causing them to buy fewer of them. According to data provider Nielsen Co., frozen-food sales are up 2% for the 52-week period ended April 14, but the number of items is down 2% during that same time.
The struggles have caused H.J. Heinz Co. (>> H.J. Heinz Company) to discontinue its T.G.I. Friday's line of frozen single-serve entrees and multiserve meals recently, as the business was losing money. ConAgra's Banquet line of frozen meals also saw a steep decline in sales volume lately after ConAgra increased prices above the $1 level, a barrier that was hard to cross for bargain seekers that tend to buy the brand.
Andre Hawaux, president of ConAgra's consumer-foods business, said during an interview Monday that Bertolli and P.F. Chang's add two higher-priced brands to ConAgra's frozen-food portfolio, which already includes names like Marie Callender's, Healthy Choice and Kid Cuisine.
While declining to provide details on performance of Unilever's frozen-foods business, Mr. Hawaux said some of Bertolli's new products, such as baked stuffed shells, didn't perform well and were discontinued, but its core business is otherwise stable.
Mr. Hawaux said ConAgra's frozen-food business has increased volume and sales and margins are improving, despite challenges in the freezer aisle that mirror what is happening in the rest of the supermarket.
"We're seeing consumers just become very smart about what they do with their shopping dollars," Mr. Hawaux said. "I don't think frozen is a whole lot different with that."
The sale is part of Unilever's plan to get out of the frozen-foods business. The global consumer-product giant has already exited the business in Europe.
The deal includes a license for using the Bertolli brand name and the transfer of Unilever's existing license with the P.F. Chang's restaurant chain for use of its name. Unilever will continue to own the Bertolli trademark and will operate its existing pasta-sauce business.
The deal doesn't include Unilever's production facility in Owensboro, Ky., where Bertolli and P.F. Chang's frozen meals are currently made, although manufacturing equipment will be relocated to an existing ConAgra facility.
ConAgra said the deal doesn't affect its fiscal 2013 outlook. The food company still expects adjusted per-share earnings to increase between 6% and 8%.
ConAgra shares closed Monday up 1.9% at $24.76. They are down 6.2% year-to-date.
Write to Paul Ziobro at paul.ziobro@dowjones.com.
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