Hillshire Brands Co. made an official statement today, revealing that it has agreed to acquire Pinnacle Foods Inc. in a deal estimated to 4.3 billion dollars. The purchase is part of the companys strategy to expand its products portfolio. The price of the deal jumps to 6.6 billion dollars in cash and stock, when the companys debt is included.
About 51% of Pinnacle Foods is owned by Blackstone Group L.P.s affiliates. According to the statement, they have agreed to vote their shares in favour of the deal. The announcement of the acquisition comes less than twelve months after the 580-million-dollar Pinnacles purchase of the Wish-Bone salad dressings division of Unilever.
The Chief Executive Officer of Hillshire Brands Co. – Mr Sean Connolly said in the statement, which was cited by Bloomberg: “The acquisition creates a leading branded food company with enhanced scale, reach and capabilities, while providing margin expansion.” As reported by the Financial Times, Chief Executive Officer Connolly also said: “The combination of Hillshire Brands and Pinnacle Foods brings together two highly complementary organizations with strong brands, skilled employees and lean cost structures.”
According to the statement, Hillshire has agreed to pay 18 dollars in cash plus 0.5 shares for each Pinnacle share. The total price is estimated to 36.45 dollars a share, which is about 20% more in comparison to the closing price of Pinnacle on May 9th.
Hillshire Brands Co. also announced that it expects to keep the current value of its annual dividend unchanged at 70 cents. However, the company explained that it intends to put its share-buyback program on hold. The company also posted a fiscal 2013 revenue of 4 billion dollars.
The deal between Hillshire Brands Co. and Pinnacle Foods Inc. is expected to be finalized by September 2014. The boards of both companies have given their approval to the purchase. The new acquisition comes only a few weeks after Hillshire announced that it had reached a 165-million-dollar agreement with Catterton Partners over Vans Natural Foods.
Hillshire Brands Co. was 0.65% up to close at 36.95 dollars per share yesterday, marking a one-year change of +5.00%. According to the information published on CNN Money, the 7 analysts offering 12-month price forecasts for Hillshire Brands Co. have a median target of 39.00, with a high estimate of 42.00 and a low estimate of 38.00. The median estimate represents a +5.55% increase from the last price of 36.95.
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
