020556 ConAgra Sells Meat Business for $1.4B

Omaha , NE - ConAgra Foods Inc. said it has agreed to sell its fresh beef-and-pork processing business to a new venture led by Hicks Muse Tate & Furst Inc. for about $1.4 billion.

ConAgra said the deal will reduce fiscal 2003 earnings by about 12 cents to 15 cents a share because of transaction costs and the "dilutive nature" of the deal. The food conglomerate projects 2003 earnings of $1.60 a share, compared with the consensus estimate of $1.56.

ConAgra said it will receive about $800 million cash and an equity interest worth $150 million at closing.

The joint venture will owe ConAgra $150 million of subordinated debt, $30 million of secured debt and about $250 million of line of credit amounts assumed by the venture.

Under the arrangement, ConAgra will reduce its equity interest in the business, ConAgra Meats Co ., to $150 million from over $1 billion currently.

The Hicks Muse group, in conjunction with Booth Creek Management Inc. and George Gillett, will own 54% of the venture, leaving ConAgra Foods with 46%. The group will have an equity interest of $175 million.

ConAgra Foods expects "solid growth" in fiscal 2003 earnings, projecting high single-digit earnings growth for its remaining operations because of growth and efficiency initiatives.

The deal is scheduled to close in August.

In March, the Wall Street Journal reported that an investor group including Hicks Muse was in talks to buy at least part of ConAgra's meatpacking business. This followed an article in Cattle Buyers Weekly speculating that ConAgra might sell a 51% stake to a group of investors including Hicks, a Dallas -based private equity firm, and George N. Gillett Jr., who has invested often in the meatpacking industry.

Some Wall Street analysts believed ConAgra wanted to structure a deal that would allow it to remove the meatpacking operation from its books, where they think it has been a drag on financial results, while giving its packaged-food units continued access to a secure source of beef and pork.

The sale reflects ConAgra's recently adopted strategy of focusing on its major food brands -- which include Healthy Choice entrees and Chef Boyardee -- and Wall Street's hope that it de-emphasize some raw-commodity businesses such as livestock slaughtering.

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