ConAgra Foods, America's second largest food company, is reportedly in talks to sell a large chunk of its fresh beef and pork operations, a move that analysts have been urging because the operations have been a drag on earnings.
The company would not comment on the speculation, which first surfaced in the latest edition of Cattle Buyers Weekly (CBW), a US cattle industry publication.
However, several Wall Street food analysts said they believed the report was true. Colorado entrepreneur George Gillett Jr., and the Texas investment firm Hicks, Muse, Tate and Furst, were named as part of an investor group interested in buying a 51 per cent stake in the business.
"I don't have doubts that it's under way," said Prudential Securities food analyst John McMillin. "I think conceptually for them to do it makes sense. But, it all depends how much they get."
Credit Suisse First Boston analyst David Nelson said: "We believe the rumours have merit and with each passing day, hear incremental information from our sources in the meat industry that adds to the veracity of the speculation and the CBW article."
Cattle Buyers' editor Steve Kay said his sources for the article "include individuals very close to the discussions as well as people involved at very high levels in the meat industry."
CWB said the deal may involve selling 51 per cent of ConAgra Beef and the company's fresh pork unit, Swift and Co., to the investor group, which has experience operating food companies. The stake could be valued at $700 million to $800 million (E795-910m), CWB said.
Speculation about such a sale has probably already been priced into ConAgra's stock, said Nelson. ConAgra shares rose 25 cents on Wednesday to $23.30 on the New York Stock Exchange.
"We would not recommend buying CAG on this speculation," Nelson said.
Since 1997, ConAgra has discussed the possibility of selling underperforming units. Its beef and pork sector, which includes six beef plants and three pork plants, has hampered its earnings growth.
"The bottom-line profitability over a number of years has not been up to ConAgra's expectations," said Jim Robb, livestock analyst with the Livestock Marketing Information Center, referring to the fresh meat and cattle feeding units.
Last year the company was believed to have put its beef processing business up for sale and to have held discussions with US pork producer Smithfield Foods.
"In life you have to do what you are good at and they have never proven to me, particularly in the beef business, that they are good at this," said Prudential analyst McMillin.
ConAgra has sales of more than $27 billion in annual sales, making it second in North America only to Kraft Foods.
In addition to beef and pork, the company has poultry and seafood operations, and operates cattle feedlots.