Boston, MA 05/13/2014 (wallstreetpr) – Hillshire Brands Co (NYSE:HSH) will acquire Pinnacle Foods Inc (NYSE:PF) for $4.3 billion including a transaction of cash and equity. After the announcement, Pinnacle shares jumped by 13% to $34.47, but, Hillshire fell by 3.2% and closed at $35.76.
The Deal
According to the agreement, Hillshire will acquire all the outstanding shares of Pinnacle, in which Pinnacle shareholders will receive $18.00 in cash per each share and an exchange ratio of 0.50 with Hillshire share. The deal valued at $6.6 billion.
The transaction will close by September 2014 based on the approval of regulatory and shareholders. After closing, Hillshire will be a major stakeholder and Pinnacle Foods Inc (NYSE:PF) will own 33% stake in the combined company. Blackstone will also represent the board of the combined company as a private equity firm holds 51% of Pinnacle stocks.
BofA Merrill Lynch and Blackstone Group LP (NYSE:BX) served as financial advisors to the transaction.
The combined advantage
Pinnacle serves more than 85% of American households in grocery categories and a leader in frozen foods with most popular brands like Birds Eye and Duncan Hines. In 2013, Pinnacle generated sales of $2.5 billion with adjusted EBITDA of $460 million. The Company expects a growth across all categories of products in 2014 with the addition of Unilever’s Wish-bone.
Similarly, Hillshire expanded its product portfolio with the acquisition of Van’s Natural Food and Golden Island, and also reported sales of $4 billion in 2013.
So, the combined company has broad brand portfolios of Pinnacle Foods Inc (NYSE:PF) and Hillshire that will create a dominant position in the food industry across frozen, refrigerated and grocery categories. The new company will benefit with large customers with more categories of products and expand its operation to a larger extent.
Conclusion
Based on the current position of Pinnacle Foods Inc (NYSE:PF), the combined company will provide an opportunity to grow and create value to the shareholders.
