After years of talks, speculation, and expectation, Conagra Brands has signed a definitive agreement to acquire Pinnacle Foods for $10.9 billion in cash and stock.
After Sean Connolly assumed the role of CEO in 2015, Conagra has undertaken a strategic plan to reinvigorate its portfolio to better align with consumer demands and reflect a more modern lineup. Toward this end, Conagra divested its Ralcorp private label business to TreeHouse Foods in the fourth quarter of 2015 for $2.7 billion; sold ingredient sourcing and distribution company JM Swank to private equity firm Platinum Equity in June 2016; and sold flavors and seasoning business Spicetec to Givaudan in May 2016. Meanwhile, the company acquired salsa and sauce manufacturer Frontera Foods in September of 2016, and acquired Thanasi Foods, a protein-based snack manufacturer, and maker of Duke’s® meat snacks and BIGS Seeds, for an undisclosed amount in March 2017.
“We continue to reshape our portfolio and focus our resources on priorities that support Conagra’s business strategy and drive value creation for shareholders,” said Connolly in a company statement announcing Conagra’s divestment of the iconic Wesson Oil brand to JM Smucker for $285 million in June of last year.
That same month Reuters reported that Conagra had approached Pinnacle foods with intent to initiate a takeover – a move that was not that surprising to industry watchers, including David Palmer with RBC Capital Markets who told the Omaha World Herald in October 2016 that he predicted that Pinnacle Foods would be a likely target for acquisition by Conagra based on Conagra’s financial position, and the potential for significant savings generated by the increased scale of the combined companies.
However, these talks did not gain traction until April of this year when activist investor Jana Partners acquired a 9.1 percent stake in Pinnacle with the intention to push for “value creation measures”, according to Food Dive.
Today, Pinnacle is a top manufacturer, marketer, and distributor of some of the most iconic food brands on the market. With annual sales that exceed $3 billion, the company has a huge presence in the frozen and snack categories through its portfolio that includes Birds Eye, Birds Eye Voila!, Duncan Hines, Earth Balance, EVOL, Gardein, Glutino, Hungry-Man, Log Cabin, Udi’s, Vlasic, and Wish-Bone, along with many others. And the merging of Pinnacle with Conagra Brands will not only bring together the two fastest growing companies in the consumer packaged foods category by consumption, but will create the second-largest frozen food company behind only Nestlé.
“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 Connolly.
Under the terms of the deal, Pinnacle shareholders will receive $68 per share, which includes $43.11 per share in cash, and 0.6494 shares of Conagra common stock for each share of Pinnacle Foods being held.
“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,” said Mark Clouse, CEO, Pinnacle Foods. “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.”
-Lynda Kiernan