Conagra Brands announces agreement to acquire Pinnacle Foods for US$10.9b

USA – Conagra Brands, Inc. and Pinnacle Foods Inc. have announced that their boards of directors have unanimously approved a definitive agreement under which Conagra Brands will acquire all outstanding shares of Pinnacle Foods in a cash and stock transaction valued at approximately US$10.9 billion, including Pinnacle Foods’ outstanding net debt.

According to Conagra Brands, Pinnacle Foods shareholders will receive US$43.11 per share in cash and 0.6494 shares of Conagra Brands common stock for each share of Pinnacle Foods held.

The combination of two growing portfolios of iconic brands will serve as a catalyst to accelerate value creation for shareholders.

The transaction will enhance Conagra Brands’ multi-year transformation plan and expand its presence and capabilities in its most strategic categories, including frozen foods and snacks.

The implied price of US$68.00 per Pinnacle Foods share is based on the volume-weighted average price of Conagra Brands’ stock for the five days ended June 21, 2018.

The purchase price reflects an adjusted EBITDA multiple of 15.8x, based on Pinnacle Foods’ estimated fiscal year 2018 results excluding synergies, and 12.1x adjusted EBITDA including run-rate cost synergies.

“The acquisition of Pinnacle Foods is an exciting next step for Conagra Brands. After three years of transformative work to create a pure-play, branded food company, we are well-positioned to accelerate the next wave of change,” said Sean Connolly, president and chief executive officer of Conagra Brands.

“The addition of Pinnacle Foods’ leading brands in the attractive frozen foods and snacks categories will create a tremendous opportunity for us to further leverage our proven innovation approach, brand-building capabilities, and deep customer relationships.

With greater scale across leading, iconic brands, an unwavering focus on driving profitable growth, and a strong balance sheet and cash flow, we are creating a tremendous platform to drive meaningful shareholder value.”

With annual net sales in excess of US$3 billion, Pinnacle Foods’ portfolio of frozen, refrigerated and shelf-stable products includes such well-known brands as Birds Eye, Duncan Hines, Earth Balance, EVOL, Erin’s, Gardein, Glutino, Hawaiian Kettle Style Potato Chips, Hungry-Man, Log Cabin, Tim’s Cascade Snacks, Udi’s, Vlasic and Wish-Bone, among others.

Based on both companies’ latest fiscal year results, pro forma net sales would have been approximately US$11 billion.

“Today’s transaction provides Pinnacle Foods shareholders with substantial and immediate value, as well as the opportunity to participate in the significant upside potential of the combined company,” said Pinnacle Foods chief executive officer Mark Clouse.

“Because of our employees’ incredible work, Pinnacle’s total shareholder return is approximately 275 percent since our IPO, and today marks an important milestone in the company’s journey.

The portfolios and capabilities of both enterprises are impressive and complementary.

We look forward to working through a seamless transition with the Conagra Brands team.”

The transaction is expected to close by the end of calendar 2018, subject to the approval of Pinnacle Foods shareholders, the receipt of regulatory approvals and other customary closing conditions.