) recently completed the sale of its North American frozen food
ConAgra Foods, Inc.
) for a total cash consideration of $267 million, subject to
CONAGRA FOODS (CAG): Free Stock Analysis Report
UNILEVER PLC (UL): Free Stock Analysis Report
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While the agreement enables ConAgra to sell the goods using
Unilever's Bertolli brand name, the company retains the trademark.
The existing license for the use of the P.F. Chang's Home Menu
brand name would however be transferred to ConAgra.
The Kentucky facility that was used to manufacture both these
product lines will now be used by Unilever for the Bertolli-branded
pasta sauce business.
The sale of the North American Frozen food operations is in line
with the company's strategy to exit the frozen food market. The
company has already divested its European frozen foods business.
The markets in these developed countries are mostly saturated and
macroeconomic conditions are difficult. As a result, business in
these markets has been sluggish and volumes have disappointed.
Therefore, the company is making a strategic move to optimize its
resources and allocate them to the more promising markets.
During the first half of fiscal 2012, Unilever expanded its
personal care business in Russia, Brazil, and the Philippines
through acquisitions. The company intends to strengthen its
consumer goods operations in these fast growing emerging markets.
An increasing middle-income population in these emerging countries
along with positive consumer spending holds potential for
growth. With solid innovation and brand building, the company
intends to drive growth in these markets in the near future.
On the other hand, the acquisition of Bertolli and P.F. Chang's
Home Menu brands is ConAgra's fifth acquisition in the last four
quarters. The acquisition will strengthen ConAgra's existing
portfolio of frozen foods, which already includes brands like Marie
Callender's Banquet, Healthy Choice and Kid Cuisine. As leading
brands of frozen multi-serve meals, Bertolli and P.F. Chang's will
support ConAgra Foods' strategy of expansion of core businesses and
adjacent segments. The acquisition will further help the company to
increase its international market share and private label
We consider Unilever PLC's expansion in the fast-growing emerging
markets a big positive. However, rising input costs and a difficult
economic environment remain headwinds. The European debt crisis,
intense competition from other established players and exposure to
unfavorable foreign currency movement undermines the company's
future growth prospects and profitability. Currently, we have a
Neutral recommendation on Unilever PLC. The stock carries a Zacks
#4 Rank (short-term 'Sell' rating).
On the other hand, we have a Neutral recommendation on ConAgra
Foods. The stock carries a Zacks #3 Rank ( short-term 'Hold'
rating). While the company's strong portfolio and brand name are
positives, we prefer to stay on the sidelines as macro economic
conditions in the U.S. are still sluggish and economic recovery may
take some time.