Fitch affirmed its ratings of ConAgra's debt following the company's announcement that it has signed a definitive agreement to acquire International Home Foods Inc. Fitch rates ConAgra's senior unsecured notes 'BBB+', subordinated debentures 'BBB' and commercial paper 'F2'. ConAgra Capital, L.C. preferred securities were also affirmed at 'BBB-'. The affirmations affect approximately $4.4 billion of debt and preferred securities. The Rating Outlook is Stable.

The total purchase price of approximately $2.9 billion includes $1.3 billion of assumed debt. ConAgra will use a combination of short-term and long-term borrowings to finance $800 million of the transaction and issue $800 million of common stock to finance the remainder. The acquisition is expected to close during the third quarter of 2000. International Home Foods Inc. major brands include: Pam cooking spray, Chef Boyardee pasta products, Bumble Bee Tuna, Louis Kemp seafood and Gulden's Mustard. The acquisition provides the company with six brands that have sales in excess of $100 million and greater scale in Mexico and Canada. For the 12 months ended March 31, 2000, International Home Foods Inc. had sales of $2.1 billion and EBDITA $340 million.

ConAgra's credit protection measures improved throughout the 1990s due to ConAgra's increasing cash flow. The company's sizeable and historically stable cash flow combined with its hedged commodity inventory help mitigate the financial risk associated with a leveraged capital structure.

ConAgra's credit protection measures will deteriorate in the near term as a result of higher leverage. On a pro forma basis, utilizing the latest 12 months data for ConAgra and International Home Foods Inc., total debt-to-EBDITA was 2.3 times (x) and EBDITA-to-interest was 4.4x. However, due to synergies from the acquisition, significant cost savings from the company's restructuring plan and the utilization of free cash flow to reduce debt, Fitch expects meaningful improvements in ConAgra's credit protection measures in the intermediate term.

ConAgra is a market leader in a number of businesses throughout the food chain. The company has over 80-plus brands, in which over 28 have sales exceeding $100 million. Approximately 58% of the company's operating income was derived from its stable and highly profitable grocery/diversified products segment in fiscal 1999. Major businesses within this segment include branded shelf stable packaged foods (e.g., Hunt's, Wesson, Van Camp's, Chun King and La Choy) and frozen foods (e.g., Banquet, Healthy Choice and Marie Callender's). ConAgra's Healthy Choice label is one of the company's greatest successes with FY99 sales in excess of $1.5 billion. The refrigerated foods segment (meat, poultry, lamb and cheese products) includes such brands as ButterBall, Armour and Swift Premium and contributed 21% to the company's operating income. In the recent past, this segment has been impacted negatively by higher operating cost and higher commodity feed cost. ConAgra's food inputs and ingredients segment (crop protection chemicals, grain processing, commodity trading and specialty retailing) contributed 21% to its operating income in fiscal year 1999.

Fitch is an international rating agency that provides global capital market investors with the highest quality ratings and research. Dual headquartered in New York and London with a major office in Chicago, Fitch rates entities in 75 countries and has some 1,100 employees in more than 40 local offices worldwide. The agency, which is a combination of Fitch IBCA and Duff & Phelps Credit Rating Co., provides ratings for Financial Institutions, Insurance, Corporates, Structured Finance, Sovereigns and Public Finance Markets worldwide.