Boston, MA 05/13/2014 (wallstreetpr) – The Hillshire Brands Co (NYSE:HSH), Jimmy Dean Pork Sausage maker, announced that it has entered into a definitive deal with Pinnacle Foods Inc (NYSE:PF), a Syrup maker, to buy the latter in a cash and stock deal. The combined entity is expected to create a diversified food company that may have sales of about $6.6 billion.
The deal
The deal between the two companies allows Pinnacle Foods shareholders to receive $18 in cash and 0.50 shares of the Hillshire Brands Co. The total enterprise cost of the transaction is estimated to be $6.6 billion. This includes the debt of Pinnacle Foods.
The ratio of 0.50 shares of The The Hillshire Brands Co (NYSE:HSH) was arrived at after taking into consideration the ten-day average closing price until May 9. This represented 18% premium to the Pinnacle Foods’ shares closing price as on May 9 or an average price of $36.02.
The combined entity is predicted to be accretive to earnings immediately. The acquisition is also expected to benefit the merged entity by achieving $140 million in cost synergies at the end of three years due to enhancement of supply chain besides the consolidation of overhead costs, and EPS accretion of over 15% annually.
The Hillshire Brands Co. disclosed that some of the Blackstone affiliates that hold 51% collectively in Pinnacle Foods stock has agreed to vote in support of the transaction, which is predicted to be completed by September.
The Management
Once the transaction is completed, Pinnacle Foods Inc (NYSE:PF) shareholders will be holding 33% stake in The Hillshire Brands Co., which will also name a representative of Blackstone to its list of Directors on the board. The merged company will be headed by the The Hillshire Brands Co (NYSE:HSH) president and SEO Sean Connolly.
The combined entity, which is predicted to generate about $6.6 billion of net revenues annually, will have a combination of the portfolios of brands to create a powerful food company with a wider reach from frozen, grocery and refrigerated categories.
