By Howard Koplowitz - The Hillshire Brands Company (NYSE:HSH) has agreed to acquire Pinnacle Foods Inc (NYSE:PF) in a cash and stock deal valued at $6.6 billion, the two companies announced Monday.
Pinnacle Foods common stock will be exchanged for $18 in cash and .5 shares of Hillshire Brands common stock in a deal that also has Hillshire acquiring Parsippany, New Jersey-based Pinnacle’s outstanding net debt, according to a joint press release issued Monday. The companies said the deal reflects a multiple of 9.6 times adjusted earnings before interest, taxes, depreciation and amortization. The acquisition “unites two highly complementary companies with iconic brands,” the statement said.
The combined company will operate under the Hillshire Brands name and will be headquartered in Chicago, the home of Hillshire. The companies said both board approved of the deal, and that the acquisition is expected to be finalized in September.
Hillshire Brands said the deal would expand its reach into the frozen and refrigerated foods space and will “create a platform with new revenue opportunities. The Chicago-based company also said the agreement means it will be able to take advantage of future expansion opportunities.
“The combination of Hillshire Brands and Pinnacle Foods brings together two highly complementary organizations with strong brands, skilled employees and lean cost structures,” Chicago-based Hillshire Brands CEO Sean Connolly said in a statement. “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.”
Pinnacle Foods CEO Bob Gamgort said in a statement that the two companies’ brands represent a “strategic fit.” Hillshire’s brands include Jimmy Dean, Hillshire Farms and Sara Lee while Pinnacle has Duncan Hines, Birds Eye, Log Cabin and Hungry-Man, among other brands.
“This compelling transaction offers Pinnacle Foods shareholders an immediate premium and the opportunity to participate in the tremendous potential of the combined organization,” he said. “The complementary portfolios and strategic fit of these two companies create significant value for the shareholders of both organizations. Our common passion for developing innovative products and maintaining close ties with our customers will position the combined entity to deliver outstanding benefits for employees, customers and shareholders.”