ConAgra Foods, the maker of Slim Jim beef jerky and Chef Boyardee pasta, said it planned to exit its struggling private label foods business, which has suffered falling sales since it was bought two years ago.
ConAgra Chief Executive Sean Connolly, who joined in April, said on Tuesday it was clear trying to turn around the private label business was draining resources.
"Today ConAgra acknowledged the need to pursue a new strategic direction," Barry Rosenstein, Jana Partners managing partner, said in an emailed statement on Tuesday. "We look forward to our ongoing discussions with the company and its advisers."
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The activist hedge fund took a 7.2 percent stake in ConAgra this month, becoming its second-largest shareholder, and said it was prepared to nominate directors to the company's board to help address "persistent underperformance" since the $5 billion Ralcorp acquisition in 2013.
"We applaud management's relatively swift decision making on its portfolio strategy," KeyBanc Capital Markets analyst Akshay Jagdale wrote in a note, adding that TreeHouse Foods and Post Holdings could be buyers.
Shares of ConAgra, which did not say how it would exit the private label business, were up 1 percent at $43.90 in morning trading.
ConAgra bought Ralcorp to become the biggest maker of U.S. private label foods, which retailers market under their own brands. Its aim was to use private brands to grow as retailers such as Wal-Mart Stores squeezed shelf space for branded products, preferring their own cheaper options.
But cut-price deals Ralcorp had made with retailers before the takeover made it difficult for the business to meet targets, with sales falling nearly 6 percent in two years.
The business is ConAgra's smallest, accounting for a quarter of revenue in the year ended May. Sales in the business fell 1 percent in the fourth quarter.
ConAgra said it would now focus on aggressively cutting costs while growing its consumer brands and its Lamb Weston potato products businesses.
Its consumer foods business, which sells products such as Act II popcorn and Bertolli pasta, reported a 4.5 percent rise in sales, after seven quarters of declines.
ConAgra's net sales rose 3.7 percent to $4.10 billion, but came in below analysts' average estimate.
Net profit attributable to ConAgra was $209.2 million from a loss of $324.2 million a year earlier. ConAgra's profit of 59 cents per share, excluding items, was in line with analysts' estimates.