Boston, MA 05/13/2014 (wallstreetpr) – Once known Sara lee, Hillshire Brands Co (NYSE:HSH), has confirmed it is in line to add Vlasic pickles and the birds of the frozen vegetable brand by acquiring Pinnacle, in a transaction valued at $6.6 billion. The deal will be made of both cash and stock as the company plans to widen its operations into dry groceries having dominated the frozen and refrigerated section.
Pinnacle Shareholders to Own 33%
The acquisition of Pinnacle will help Hillshire Brands Co (NYSE:HSH) improve its overall profit margin through the addition of lower cost non meat ingredients products. Closure of the deal will see Pinnacle shareholders entitled to 33% of the combined company led by Hillshire CEO Sean Connolly. Pinnacle majority shareholder at 51% Blackstone has agreed to the terms of the acquisition and will consequently appoint a representative to the new combined company, board of directors.
Under the terms of the merger, Pinnacle shareholders will be entitled to $18 in cash and half a share of Hillshire Brands Co (NYSE:HSH) for each Pinnacle share held. Hillshire acquisition values Pinnacle sat $36.02 a share representing an $18% premium to the company’s closing price on Friday. The combination will essentially bring 10 major brands under the control of Hillshire. The combined company, when fully integrated, is expected to contribute annual sales of up to $6.6 billion.
Blackstone to Receive $1.1billion
The new company will be based at Hillshire’s headquarters in Chicago making it one of the largest food companies in the U.S with food products across all categories. The acquisition of Pinnacle comes at a time that Hillshire is trying to diversify its business especially in the dry goods shelves. Pinnacle comes into the merger with $2.6 billion worth of annual revenue owning one of the best known brands in food categories such as Wish-Bone Salad dressing.
Completion of the transaction will mark full exit of Blackstone which has been running the shots at Pinnacle with 51% stake. Blackstone had acquired Pinnacle for $2.2 billion in 2007 and will consequently receive $1.1 billion in cash for the transaction and $1.1 billion in stock. Blackstone will also hold 15% stake in the new entity once the deal fully closes. The agreement is expected to close in September awaiting legal and customary closing conditions.
