ConAgra Foods Inc. said Monday that it has agreed to sell its struggling private label business to TreeHouse Foods Inc. for about $2.7 billion in cash, less than three years after spending nearly double that to buy it.

Under pressure from activist investor Jana Partners, the maker of Chef Boyardee products and Wesson cooking oil said in June that it would divest the unit and consider other strategic moves to bolster ConAgra amid broad tumult in the packaged-food business.

The deal will enable ConAgra to sharpen its focus and resources on its consumer foods and commercial foods segments, Chief Executive Sean Connolly said, noting the deal will help make ConAgra a "higher-margin, more contemporary and higher-performing company."

The deal comes after Jana, which has built a more than 7% stake in ConAgra, criticized the company this summer for its handling of the Ralcorp Holdings Inc. business that ConAgra bought in January 2013. ConAgra's private-label division makes cereal, pasta, condiments and snacks for supermarket to use as their house brands

Under the deal's terms, ConAgra will sell most of its private-label operations to TreeHouse, including a network of 32 manufacturing facilities in the U.S., Canada and Italy. ConAgra will retail certain private label operations with a "strong connection to its existing consumer food business," including canned pasta, cooking spray and the Kangaroo brand portfolio.

Proceeds from the transaction, which is expected to close in the first quarter of 2016, will be used to pay down debt.

For its part, Illinois-based TreeHouse said the deal will expand its presence in private label dry and refrigerated grocery.

In the year ending in May, ConAgra's private brands operations had about $3.6 billion in sales. Following the deal's completion, TreeHouse will have pro forma sales of about $7 billion, the company said.

Shares in ConAgra, up 12% this year through Friday's close, jumped 13% in light premarket trading. TreeHouse's shares, flat on the year, were inactive.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

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(END) Dow Jones Newswires

November 02, 2015 08:15 ET (13:15 GMT)

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