Conagra Brands buys Pinnacle Foods in US$10.9bn cash deal

27 Jun 2018 --- Conagra Brands has purchased Pinnacle Foods in a deal valued at US$10.9 billion including debt, expanding its footprint in the frozen-food sector. The boards of Conagra Brands and Pinnacle Foods Inc. have unanimously approved the definitive agreement under which Conagra Brands will acquire all outstanding shares of Pinnacle Foods in a cash and stock transaction, including Pinnacle Foods' outstanding net debt. 

The deal will create a group with combined revenues of US$11 billion. 

Conagra will pay US$68 a share for Pinnacle Foods in cash and stock. This gives Pinnacle shareholders US$43.11 a share in cash and 0.6494 shares of Conagra shares for each share of Pinnacle one owns, says the Wall Street Journal.

The combination of two growing portfolios of iconic brands will create a leader in frozen foods with an expanded presence in snacks. The move will deliver US$215 million in annual run-rate cost synergies by fiscal 2022.

According to the Financial Times, “Pinnacle and Conagra reached a definitive agreement on Tuesday evening (June 26).”

CNBC cites people familiar with the matter as saying that a deal is imminent, and earlier in the week said that the two companies had been in advanced talks to close the deal.

The news comes days after sources told Reuters that Pinnacle Foods had restarted talks about potentially selling itself to its larger peer.

Conagra, the maker of Swiss Miss cocoa powder, has a market value of US$15 billion and has been in discussions to buy Pinnacle for several months as it seeks to expand its frozen foods offerings. 

Pinnacle has a market capitalization of US$8 billion and when combined, the two companies will become the largest makers of frozen foods, in terms of revenues, followed by Swiss giant Nestlé.

Frozen foods have been making an unlikely comeback and popularity has grown since makers of frozen foods have portraying frozen goods as healthier than in the past. Last month FoodIngredientsFirst reported how millennial consumers are taking a fresh look at frozen.

The Conagra and Pinnacle deal comes at a time when the consumer industry has been rapidly consolidating as they struggle to meet their revenue targets. 

Shares of Pinnacle, which rose as much as 6 percent immediately after the reports, trimmed gains to trade up 2.5 percent, according to Reuters.

Pinnacle has been under pressure to sell itself since Jana Partner, the activist hedge fund, acquired a 9.1 percent stake in the company in April this year, says the Financial Times.