Lamb Weston takes big step toward independence

Independence Day for Lamb Weston is still a few months away.

But the future publicly traded frozen potato company with substantial Mid-Columbia operations now has a name, key executives and even a stock ticker symbol.

Chicago-based ConAgra Foods (NYSE: CAG) filed a registration statement July 13 for Lamb Weston Holdings Inc. with the U.S. Securities and Exchange Commission. The move is an important step toward spinning off its french fry division this fall.

The highly technical document offers insights into the plans and finances of Lamb Weston.

Most important, it now has leaders — Thomas P. Werner, 50, will be its president and CEO, and Timothy R. McLevish, 61, will lead its board.

Lamb Weston has corporate offices in Boise and Kennewick, as well as manufacturing centers in Richland, Pasco and Boardman. It is a major customer for the region’s potato growers.

In June, it announced plans to invest $200 million in Richland to develop a second french fry line to meet growing global demand. The investment includes incentives from the state of Washington and the Tri-City Development Council.

The registration document serves as notice to the federal securities agency that a new company is forming. The final outlines will be decided after negotiations.

The document is notably silent on some important details, including the location of the company’s headquarters and total number of employees.

Carl Adrian, president and CEO of TRIDEC, said a standalone Lamb Weston is good news for the region, wherever the headquarters land.

“It puts control closer to us, whether it’s Boise or here,” he said.

The company

Lamb Weston Holdings Inc. is the official name of the company that incorporated in Delaware on July 5, 2016 as a subsidiary of ConAgra.

Lamb Weston will become independent when ConAgra distributes its shares. U.S. companies often incorporate in Delaware for business climate reasons but have their operational headquarters elsewhere. Pending acceptance by the New York Stock Exchange, its shares will trade under the symbol “LW.”

The business

Lamb Weston will retain the frozen potato, sweet potato, appetizer and other vegetable products business. ConAgra will retain the consumer foods segment that includes Marie Callender’s, Hunt’s, Slim Jim, Orville Redenbacher’s, P.F. Chang’s and Healthy Choice.

Lamb Weston is the leading supplier of frozen potato products in the U.S. and the second-largest in the world. Its international portfolio touches more than 100 countries. Frozen french fries are the majority of its business.

Top executives

McLevish will be executive chairman of the Lamb Weston board. He is the former chief financial officer and executive vice president at Walgreens Boots Alliance Inc. and has held positions within Kraft Foods Group and Kraft Foods Inc.

Werner will be president and chief executive officer in charge of day-to-day operations of the company. He will also serve as a director. He is president of the commercial foods division of ConAgra, overseeing operations related to Lamb Weston

The numbers

In 2015, Lamb Weston generated $2.9 billion in sales, yielding $268 million in net income. Its income tax bill was $140.4 million.

The company was worth $1.6 billion in February 2016, a figure that includes ConAgra’s equity stake of nearly $1.5 billion and $140 million in debt.

Its 2016 sales are running approximately 5 percent ahead of 2015.

The market

The U.S. consumes 35 percent of the world’s frozen potato products. An estimated 60 percent of U.S. restaurants offer french fries or similar products.

Euromonitor anticipates global market for frozen processed potatoes will grow by 2.7 billion pounds by 2020, for an annual growth rate of 2 percent. Lamb Weston identifies South America, Russia, the Middle East and China as high-growth markets.

In 2014, the company paid $92 million for a frozen potato plant at Shangdu, Inner Mongolia, China, offering it a platform to serve Asian customers. It expects to participate in a joint venture in Russia.

It holds 50 percent stakes in Lamb-Weston Meijer in the Netherlands, which serves the European market, and in Lamb Weston RDO, a processing venture.

Possible downsides

Lamb Weston will bear the sole cost of corporate functions, previously spread across ConAgra. As a smaller company, the costs may be proportionately higher, especially if it has to adopt new financial systems to comply with SEC reporting requirements.

It could have to pay taxes related to the spinoff. The deal is structured as a tax-free transaction, but Lamb Weston will indemnify ConAgra for any taxes that may be owed.

Lamb Weston’s business could be disrupted by currency valuations, economic conditions, pandemics, weather events, international trade barriers, labor requirements and other external issues, including environmental issues that could affect potato production.

This story was originally published July 15, 2016 at 4:44 PM with the headline "Lamb Weston takes big step toward independence."