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Conagra to buy Pinnacle Foods for $10.9 billion

Deal would create powerhouse in consumer packaged foods

Conagra Brands Inc. plans to boost its roster of household names in grocery with a $10.9 billion deal to acquire Pinnacle Foods Inc.

Under an agreement unveiled Wednesday, the food manufacturers said Conagra would pay about $7.9 billion in cash, or $43.11 per share, and approximately 0.65 shares of its common stock, valued at approximately $3 billion, to Pinnacle shareholders. The acquisition transaction also includes the assumption of Pinnacle’s outstanding debt.

Together, Conagra and Pinnacle would form a food company with pro forma annual net sales of about $11 billion. The product lineup at Parsippany, N.J.-based Pinnacle, whose yearly sales top $3 billion, spans the frozen, refrigerated and shelf-stable food categories and includes such 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.

Conagra and Pinnacle noted that the merged company will be better positioned to capitalize on trends in frozen food and snacking, including segments like frozen and refrigerated meals and snacks and sweet treats. 

What’s more, Chicago-based Conagra said the acquisition will further its multiyear transformation plan and bolster its capabilities in its most strategic categories.

"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," Conagra President and CEO Sean Connolly said in a statement. "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."

Conagra’s portfolio includes such established names as Marie Callender's, Reddi-wip, Hunt's, Healthy Choice, Slim Jim and Orville Redenbacher's plus emerging brands like Alexia, Blake's, Frontera, Duke's and Angie's Boomchickapop.

Conagra and Pinnacle Foods said that they are two of the fastest-growing companies in consumer packaged foods by consumption, and they expect that momentum to continue due to the larger scale and new opportunities to partner with customers that the merger will bring. Their combined portfolio will include two billion-dollar brands — Marie Callender’s (Conagra) and Birds Eye (Pinnacle) — as well as five brands with sales exceeding $450 million — Banquet, Healthy Choice, Hunt’s, Chef Boyardee and Slim Jim (all from Conagra) — and about two dozen brands of $100 million or more.

"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," Pinnacle CEO Mark Clouse said. "Because of our employees' incredible work, Pinnacle's total shareholder return is approximately 275% 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."

Conagra and Pinnacle said they expect their organizations’ complementary portfolios, supply chains and “results-oriented” cultures to help smooth the integration process. Conagra projects about $215 million in annual run-rate cost synergies by the end of fiscal 2022.

Under the deal, Pinnacle shareholders are expected to own approximately 16% of the combined company. The transaction is slated to close by the end of calendar 2018, pending regulatory and Pinnacle shareholder approval and other customary closing conditions.

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