Recently, ConAgra Foods, Inc. (CAG) decided to acquire the assets of American Pie, LLC. However the financial terms were not disclosed. American Pie manufactures frozen fruit pies, thaw and serve pies, fruit cobblers and pie crusts under the licensed Marie Callender’s and Claim Jumper trade names, as well as frozen dinners, pot pies and appetizers under the Claim Jumper trade name.
 
The transaction is expected to close within a month. The acquired company will be part of the Consumer Foods segment. During the third quarter of fiscal 2010, the segment reported a 2.2% yearly increase in revenue based on continuous innovation, marketing and customer service initiatives taken by the company. We believe that the acquisition will further enhance revenue in the segment.
 
ConAgra has grown primarily through acquisitions and divestitures, which would continue in the future. ConAgra has divested several businesses in fiscal 2008 and 2009, including trading and merchandising operations, Pemmican beef jerky business and Knott’s Berry Farm jelly and jam business.
 
Recently, ConAgra approved a $500 million share repurchase authorization. This reflects the company’s strong cash position and positive cash flow outlook. ConAgra plans to repurchase its shares periodically, depending on market conditions and other factors, and may do so in the open market or through privately negotiated transactions. The company expects this to be a multi-year program.
 
The company has significant potential based on the improvements in its supply chain, sales execution, marketing, and innovation capabilities.
 
Lastly, ConAgra’s cost reduction initiatives will bear fruit going forward. It continues to focus on controlling general and administrative costs across the organization. We anticipate this initiative will generate benefits in fiscal 2010 and beyond.
 
ConAgra expects fiscal 2010 EPS at $1.73, compared with $1.42 in fiscal 2009. Annual sales growth is expected in the range of 3% to 4% over the long term and annual EPS growth is expected in the range of 8% to 10%. Return on invested capital is expected between 13% and 14% over the long term.

 

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