The Hillshire / Pinnacle Foods deal

Hillshire Brands to Buy Pinnacle Foods for $4.3 Billion

Hillshire Brands Co. agreed to buy Pinnacle Foods Inc. for $4.3 billion in a bet that mixing hot dogs and frozen cakes with pickles, syrup and salad dressing will add up to a more appetizing business. The deal, announced on Monday, would create a company with more than $6 billion in annual revenue and a broad array of brands including Hillshire's namesake lunch meats, Jimmy Dean sausages, Ball Park hot dogs, and Sara Lee frozen desserts and Pinnacle's Vlasic pickles, Wish-Bone salad dressings, Birds Eye frozen vegetables and Log Cabin syrup. Pinnacle, which is majority owned by investment firm Blackstone Group L.P., estimates 85% of U.S. consumers buy at least one of its products.

The Pinnacle deal, expected to close by September, is the biggest for Hillshire since the company, formerly known as Sara Lee Corp., spun off its coffee and tea business in 2012 to focus more on U.S. food sales, renaming itself in the process. Hillshire, valued at about $4.5 billion before the new deal's announcement, plans to buy a company nearly as large as itself, with Pinnacle valued at $3.6 billion at Friday's close. The companies said the deal valued Pinnacle at $36.02 a share based on Hillshire's average closing price before the deal. That would be an 18% premium over Pinnacle's closing price Friday. Pinnacle shareholders will receive $18 in cash and a half share in Hillshire for each Pinnacle share. The companies said the total value of the transaction, including Pinnacle's debt, is about $6.6 billion.
Comment: Synergies

1 comment:

  1. Reaction:

    The deal, which is an 18% premium to Pinnacle's Friday close, combines the former's Ball Park and Jimmy Dean brands with the latter's Aunt Jemima and Duncan Hines. Analysts are all over the map on Hillshire's prospects this morning, with JPMorgan (NYSE:JPM) reducing its rating even as Sanford Bernstein reiterates its bullish "buy" recommendation. Wells Fargo is in the optimistic camp, increasing its investment assessment on an expectation of both merger synergies and a broader product portfolio.


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