Boston, MA 05/16/2014 (wallstreetpr) – Packaged foods company Pinnacle Foods Inc (NYSE:PF) has agreed to merge into Hillshire Brands Co (NYSE:HSH) in a deal worth $6.6 billion, including debt. The two food companies expect to close their tie-up in September.
The transaction involves cash and stock and is valued at $4.23 billion without debt. Shareholders of Pinnacle Foods will receive cash consideration of $18 for each share of the company and 0.50 shares of common stock of Hillshire Brands. As such, the purchase price comes to $36.02 per share of Pinnacle Foods. That price implies about 18 percent premium over the closing price of Pinnacle Foods shares on the trading day before the deal was announced.
Ending Blackstone Group control
Blackstone Group LP (NYSE:BX) owns about 51 percent stake in Pinnacle Foods Inc (NYSE:PF). It acquired the food company in 2007 and took it through an initial public offering in 2013, retaining a majority stake in the company’s common stock. The announced transaction in which Pinnacle Foods will merge into Hillshire will end Blackstone’s control of the packaged food company.
Under the control of Blackstone, Pinnacle Foods grew through acquisitions, buying Wish-Bone in October last year and Birds Eye in 2009. Owing to its expanding market share, Pinnacle Foods had net annual sales of $2.5 billion in 2013.The company’s products and brands include Aunt Jemima and Duncan Hines.
Board approval
The boards of Pinnacle Foods Inc (NYSE:PF) and Hillshire unanimously approved the deal. The new company will be based in Chicago and will retain the name Hillshire Brands.
According to Hillshire Brands CEO Sean Connolly, the combined company will enjoy strengthened position in the frozen foods, with other benefits being expansion of market share, considering that Pinnacle Foods Inc (NYSE:PF) has its products in almost 85 percent of the U.S. household. The products of Hillshire Brands include Jimmy Dean, Hillshire Farm and Ball Park.
The companies also expect to benefit from a strong marketing and sales team through the tie-up as well as the ability to realize greater cost-savings.
