UPDATE 4-ConAgra to sell trading business; profit up

(Adds segment details, comments from company, analyst; updates shares)

By Brad Dorfman

CHICAGO, March 27 (Reuters) - ConAgra Foods Inc (CAG.N: Quote, Profile, Research) said on Thursday it would sell its commodity trading and merchandising operations in a deal valued at $2.1 billion, allowing it to focus on its core food business and to repurchase shares.

The company also reported much higher-than-expected quarterly profit, as results from that trading business and the company's food and ingredients segment helped offset falling profit at its largest unit, consumer foods, which has been hurt by soaring commodity costs.

The company also raised its fiscal 2008 earnings forecast.

Shares of ConAgra, whose brands include Healthy Choice meals and Chef Boyardee pasta, were up 5.8 percent at $23.16 at midday on the New York Stock Exchange, after rising as high as $24 earlier in the session.

ConAgra agreed to sell the trading and merchandising business to the Ospraie Special Opportunities fund, an affiliate of investment management firm Ospraie Management, which is focused on commodities and basic industries. The acquired business will be renamed Gavilon LLC.

ConAgra will receive $1.6 billion in cash, subject to working capital fluctuations and $525 million in payment-in- kind securities of a newly created Gavilon holding company, ConAgra said.

The trading and merchandising business, a vestige of ConAgra's roots as more of a commodity-based company, has helped support ConAgra's profits for several quarters, while other parts of its business have suffered.