OMAHA, Neb.--(BUSINESS WIRE)--March 27, 2008--ConAgra Foods, Inc.,
(NYSE:CAG), announced today that it has reached an agreement to sell
its commodity trading and merchandising operations conducted by
ConAgra Trade Group to the Ospraie Special Opportunities fund and
other investors for approximately $2.1 billion, subject to certain
adjustments. The Ospraie Special Opportunities fund is an affiliate of
Ospraie Management, a leading investment management firm focused
exclusively on commodities and basic industries with approximately $9
billion under management. ConAgra Trade Group will be renamed Gavilon
LLC upon completion of the sale.
Under the terms of the agreement, ConAgra Foods will sell the
operations of ConAgra Trade Group, also known as the company's Trading
and Merchandising segment, in exchange for approximately $1.6 billion
in cash, subject to working capital fluctuations, and $525 million
(face value) of payment-in-kind debt securities of a newly created
Gavilon holding company. The weighted average interest rate on the
debt securities is 10.82 percent. The final purchase price will be
adjusted based on working capital changes subsequent to Feb. 24, 2008.
In addition, ConAgra Foods will receive a contingent right to a
portion of future earnings during the remainder of calendar 2008 and a
warrant exercisable for 8 percent of the equity of the purchaser.
Greg Heckman, president of the ConAgra Foods commercial
businesses, will become chief executive of Gavilon upon close of the
transaction, which is expected within 60 days, subject to satisfaction
of customary closing conditions, including normal regulatory
approvals. Gavilon will remain in its current offices in Omaha, Neb.
Virtually all of the approximately 950 employees of ConAgra Trade
Group will become employees of Gavilon. The agreement includes 144
facilities, located primarily in North America. Gavilon will conduct
grain and byproducts merchandising and fertilizer distribution, as
well as agriculture, energy and other commodity trading activities,
and risk management services.
"Given our existing and ongoing emphasis on our core strategic
food platforms, along with the strength of the commodities cycle, we
believe this is an excellent time to exit this business," said Gary
Rodkin, chief executive officer of ConAgra Foods. "The sale gives us a
unique opportunity to redeploy capital, largely toward share
repurchases. The benefit of capital redeployment, along with the
ongoing growth initiatives in our core food businesses, are expected
to improve the quality and sustainability of our earnings results."
John Duryea, portfolio manager of the Ospraie Special
Opportunities fund, said, "We are excited to acquire this dynamic
business and look forward to working with Gavilon's talented team to
build on the success of its agricultural, energy and fertilizer
commodities distribution, merchandising and trading. As a stand-alone
entity, Gavilon will continue to provide its clients with the most
innovative solutions. Through enhanced resource allocation and by
pursuing incremental opportunities, Ospraie intends to further grow
Additional details of the transaction include:
-- Select trading and merchandising personnel dedicated to buying
key commodities used in ConAgra Foods' products and for its
operations will become part of ConAgra Foods' enterprise
procurement function. Dedicated personnel will continue to
monitor the value at risk and risk limits associated with the
ongoing procurement needs of ConAgra Foods.
-- Given the large working capital requirements for the Trading
and Merchandising segment's operations in recent periods, the
company is expecting lower and more predictable ongoing
working capital requirements for ConAgra Foods following
completion of the sale. Over time, this should result in more
consistent operating cash flows. ConAgra Foods intends to
continue to use share repurchases as the benchmark for its
capital allocation decisions.
ConAgra Foods confirmed that the items announced today would not
change its long-term EPS annual growth expectations of 8-10 percent,
excluding items impacting comparability. Despite forgoing operating
income from the Trading and Merchandising segment following the sale,
the company expects share repurchases and interest income related to
the transaction, along with expected profit improvement from the core
food operations, to allow delivery of this core algorithm commitment
of 8-10 percent earnings growth throughout its planning horizon.
The company expects to apply initial projected after-tax cash
proceeds from the ConAgra Trade Group sale of approximately $1.4
billion, based on current working capital levels, primarily to share
repurchases, but also toward debt reduction and internal investment
Additional information on the announced sale
Ospraie and Gavilon have received commitments from a bank lending
group for operating financial support for Gavilon in excess of $1.5
billion, subject to customary conditions. A summary term sheet for the
ConAgra Trade Group sale, as well as the earnout and warrant
structure, follows this release. The transaction has been approved by
the ConAgra Foods Board of Directors.
Centerview Partners, LLC acted as primary financial advisor to
ConAgra Foods and provided a fairness opinion on the transaction. UBS
Investment Bank also acted as a financial advisor to ConAgra Foods.
Credit Suisse served as financial advisor to Ospraie, while J.P.
Morgan Securities Inc. is acting as lead arranger of the acquisition
financing and of the Gavilon stand alone credit facilities.
Investor conference call
As part of regularly scheduled communication for the company's
third quarter earnings, which will be announced today, ConAgra Foods
will host a conference call at 9:30 a.m. EDT to discuss the earnings
results as well as this agreement. Following the company's remarks,
the call will include a question-and-answer session with the
investment community. Domestic and international participants may
access the conference call toll-free by dialing 1-877-704-5380 and
1-913-312-1231, respectively. No confirmation or pass code is needed.
This conference call also can be accessed live on the Internet at
http://investor.conagrafoods.com. A rebroadcast of the conference call
will be available after 1 p.m. EDT. To access the digital replay, a
pass code number will be required. Domestic participants should dial
1-888-203-1112 and international participants should dial
1-719-457-0820 and enter pass code 5085364. A rebroadcast also will be
available on the company's Web site.
ConAgra Foods, Inc., (NYSE:CAG) is one of North America's leading
packaged food companies, serving consumer grocery retailers, as well
as restaurants and other foodservice establishments. Popular ConAgra
Foods consumer brands include: Banquet, Chef Boyardee, Egg Beaters,
Healthy Choice, Hebrew National, Hunt's, Marie Callender's, Orville
Redenbacher's, PAM and many others. For more information, please visit
us at www.conagrafoods.com.
Established in 1999 and headquartered in New York City, Ospraie
Management, LLC is a leading investment management firm with over $9
billion under management, focused exclusively on commodities and basic
industries. Ospraie combines in-depth industry knowledge with
financial expertise and a long-duration perspective to identify and
execute on attractive opportunities in its investment universe.
Note on forward-looking statements:
This release contains forward-looking statements. These statements
are based on management's current views and assumptions of future
events and financial performance and are subject to uncertainty and
changes in circumstances. The company undertakes no responsibility to
update these statements. Readers of this release should understand
that these statements are not guarantees of performance or results.
Many factors could affect the company's actual financial results and
cause them to vary materially from the expectations contained in the
forward-looking statements. These factors include, among other things,
the ability of the company to timely complete the pending transaction,
future economic circumstances, industry conditions, the company's
ability to execute its operating and restructuring plans, availability
and prices of raw materials, product pricing, competitive environment
and related market conditions, operating efficiencies, the ultimate
impact of recalls, access to capital, actions of governments and
regulatory factors affecting the company's businesses and other risks
described in the company's reports filed with the Securities and
Exchange Commission. The company cautions readers not to place undue
reliance on any forward-looking statements included in this release,
which speak only as of the date made.
ConAgra Trade Group Transaction Summary
The following is a summary. For additional information, please refer
to ConAgra Foods, Inc.'s ("ConAgra Foods") Current Report on Form 8-K
filed March 27, 2008.
Buyer: New entities formed and controlled by Ospraie Special
Opportunities fund and its affiliates
Business: Substantially all of ConAgra Foods' Trading and
Merchandising reporting segment, including the stock
and various assets of entities involved in domestic and
international grain merchandising, fertilizer
distribution, agricultural and energy trading and
services, and byproducts merchandising and distribution
Following the sale, the Business will be operated as
Price: Book value plus $600 million. Based on the Business's
unaudited balance sheet as of February 24, 2008, the
price would have been approximately $2.1 billion. Due
to the book value component of the purchase price, the
total proceeds received are subject to change based on
actual working capital and asset/liability changes
prior to closing.
ConAgra Foods will receive an additional $39 million at
closing if the senior operating cash flow facility made
available to Gavilon, LLC at closing is rated less than
Financing: ConAgra Foods will finance $525 million of the purchase
price through the receipt of three tranches of debt
securities, having scheduled maturities of two, three
and four years following closing. The coupon rate on
the three tranches are 10.5%, 10.75% and 11%,
respectively, and the debt securities permit payment of
interest by issuing additional notes. All or part of
the notes may be redeemed at any time. The redemption
price during the first year is at a price of 92.5% plus
interest. Redemption thereafter is at par.
Warrant: At closing, ConAgra Foods will receive a warrant to
acquire an approximate 8% interest in the purchaser of
the Business. Key terms of the warrant include a four-
year term, exercise price of 200% of the Business
purchaser's initial equity value (subject to reduction
in connection with early distributions on equity) and
applicability of normal anti-dilution adjustments.
Earnout: From closing through December 21, 2008, ConAgra Foods is
entitled to receive additional amounts equal to 50% of
Gavilon, LLC's profits before tax in excess of $36
million per quarter (pro-rated for partial periods).
The earnout is subject to an overall cap. Because pre-
closing profits before tax are considered against the
cap, ConAgra Foods does not anticipate the total
earnout to exceed approximately $50 million.
Earnout amounts may be paid in additional three-year
pay-in-kind notes with an interest rate of 10.75%.
Closing The purchase agreement is subject to customary closing
Conditions: conditions, including regulatory approvals and
availability of the senior operating cash flow facility
consistent with the terms of the bank commitments.
CONTACT: ConAgra Foods, Inc.
Teresa Paulsen, 402-595-5210 (Media)
Vice President, Corporate Communication
Chris Klinefelter, 402-595-4154 (Analysts)
Vice President, Investor Relations
For Ospraie Management
Sard Verbinnen & Co
Jonathan Gasthalter, 212-687-8080
SOURCE: ConAgra Foods, Inc.