Could Conagra Foods Lamb Weston Become Part of Post Holdings?

On November 18, 2015 Conagra Foods announced plans to spin off Lamb Weston and has since mentioned during the presentation of their latest financial results that the separation of Conagra Foods into Lamb Weston and Conagra Brands is on track.

Now rumors surface that Conagra Foods has met with Post Holdings to discuss a potential merger with Lamb Weston (WSJ).

Post Holdings recently met with ConAgra to discuss a potential merger with ConAgra's Lamb Weston frozen potato business, people familiar with the matter told The Wall Street Journal.

While those talks have halted for now, they could start back up again once ConAgra finalizes plans for spinning off Lamb Weston from its consumer brands, which the company announced late last year, the sources said.

Post is primarily focused on Cereals. But Business publication Food Dive points out that Post hasn't shied away from acquisitive growth in other categories, including its $2.5 billion acquisition of egg and dairy producer Michael Foods in 2014. Michael Foods struggled when the bird flu outbreak slammed the egg and poultry industries last year.

As PotatoPro, we want to point out that as part of the acquisition of Michael Foods, Post did acquire the refrigerated potato processing business, 'Simply Potatoes'.

A Lamb Weston merger would be the biggest deal for Post to date, and it would further diversify the company's portfolio with little overlap to protect overall revenue and profitability from an individual segment's declines.

The deal structure would have been what's known as a Reverse Morris Trust, a tax-efficient transaction in which a company (here, ConAgra) breaks off part of its business and merges the spinoff with another similarly-sized company, according to the sources.

Lamb Weston was reportedly valued at about $6 billion, and Post's market value was about $4.9 billion as of Tuesday afternoon, The Wall Street Journal reported.