Hillshire Brands buys Pinnacle Foods

by The City Wire staff ([email protected]) 118 views 

The Hillshire Brands Co. struck a deal to buy Pinnacle Foods Group for $6.6. billion as the meat company seeks to diversify its brands, expanding its reach into the center of the store.

“The combination of Hillshire Brands and Pinnacle Foods brings together two highly complementary organizations with strong brands, skilled employees and lean cost structures,” said Sean Connolly, president and CEO of Hillshire Brands.

He said the acquisition creates a leading branded food company with enhanced scale, reach, and capabilities while providing margin expansion and strong earnings per share accretion. By the end of year three, Hillshire Brands said it expects the combined company to achieve $140 million in estimated annual cost synergies primarily derived from supply chain enhancements and the consolidation of overhead expenses, and annual EPS accretion in excess of 15%.

“We believe our increased scale combined with a more diversified portfolio will deliver strong, consistent cash flows. This will enable us to continue to invest in our brands, enhance our portfolio, pursue value accretive M&A and deliver significant long-term value to our shareholders,” Connolly noted in the release.

Each share of Pinnacle Foods common stock will be exchanged for $18 and 0.5 shares of Hillshire Brands common stock. The implied purchase price based on an average established by the companies is $36.02 per share and represents an 18% premium to the price of Pinnacle Foods’ common stock based on the closing price on Friday May 9, the company’s said.

“This compelling transaction offers Pinnacle Foods shareholders an immediate premium and the opportunity to participate in the tremendous potential of the combined organization,” said Bob Gamgort, CEO of Pinnacle Foods.

The deal also gives Hillshire Brands a stronger position in frozen foods, with opportunities in the center of the store. Hillshire Brands is a maker of processed meats and frozen breakfast sandwiches. The company also recently acquired Van’s Natural Foods. The Pinnacle Foods portfolio of brands includes Duncan Hines baking mixes, Vlasic pickles, Wish-Bone salad dressings, Mrs. Butterworth’s and Log Cabin syrups, Armour canned meats, and Brooks and Nalley chilies.

Hillshire Brands and Pinnacle Foods are suppliers to Wal-Mart Stores and Pinnacle Foods also operates a large manufacturing facility in Fayetteville. Both have sales offices in Northwest Arkansas.