Hillshire Farm Buys Pinnacle Foods For $6.6 BillionBy: Sean Patterson - May 12, 2014
Hillshire Brands, the food company behind Jimmy Dean Sausages, Ball Park hot dogs, and Sara Lee frozen pies, today announced that it will be acquiring food company Pinnacle Foods. Hillshire will acquire all outstanding shares of Pinnacle stock for approximately $4.3 billion. Including Pinnacle’s debt, the deal is valued at around $6.6 billion.
Pinnacle foods is best known for its Duncan Hines cake mixes, Vlasic pickles, Mrs. Butterworth’s flavored syrups, Birds Eye frozen vegetables, and Hungry-Man frozen dinners. The company also produces a wide variety of food products under the Wish-Bone, Western, Armour, Van de Kamp’s, and Husman’s brands.
The purchase will be financed in both cash and stock transactions. Hillshire has agreed to purchase each share of Pinnacle for $18 and half a share of Hillshire Brands common stock. The full estimated value of $6.6 billion matches Hillshire’s projection of the companies’ combined 2014 sales.
The acquisition is awaiting shareholder approval, which is certain due to an agreement with Blackstone Group, an investment group that collectively owns 51% of Pinnacle and has agreed to vote for the merger. Hillshire’s board of directors has already approved the purchase and the transaction is expected to be finalized by September.
“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, CEO of Hillshire. “The acquisition creates a leading branded food company with enhanced scale, reach, and capabilities while providing margin expansion and strong EPS accretion. The new Hillshire Brands will have a strengthened position in frozen foods, new opportunities in the center store for our brands and in refrigerated for Pinnacle Foods’ brands. 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.”
Hillshire is already looking forward to the product expansion the acquisition will bring. As part of its announcement the company declared that its frozen food and refrigerated product lines will see a major expansion. Hillshire also predicts that the purchase will steady the company’s cash flow with a wider array of products.
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