Hillshire Buys Pinnacle Foods For $4.3 Billion

Hillshire Brands has agreed to purchase Pinnacle Foods for $4.3 billion. With their third acquisition in the last year, company officials expect Hillshire to save $140 million in next three years. Although it is subject to shareholder approval, the deal is expected to close by the end of August.

Following the announcement, Hillshire shares dropped 4.7 percent and Pinnacle shares were up close to 15 percent.

Hillshire Brands was formed in 2012, when the Sara Lee Corporation split into two branches. Following the split, Sara Lee maintained the company’s coffee and tea divisions, while all other divisions were reorganized under the new name.

Currently, Hillshire Brands’ divisions include Ball Park, Aidells, Jimmy Dean, Sarah Lee Frozen Bakery, and numerous others. With the acquisition of Pinnacle Foods, Hillshire will broaden their reach with Vlasic, Wish-Bone, Birds Eye, Mrs. Butterworths, and Duncan Hines products.

In April, Hillshire Brands acquired Van’s Natural Foods, which includes products that are popular with health-conscious consumers. As reported by LA Times, the whole-grain and gluten-free products are expected to appeal to a broader range of consumers.

Although a majority of Hillshire products are refrigerated or frozen, Pinnacle Foods offers a wider variety of products, including salad dressings, cake mixes, canned, and jarred foods.

Hillshire Chief Executive Sean Connolly said, “The combination of Hillshire Brands with Pinnacle Foods brings together two highly complementary organizations with strong brands, skilled employees, and lean cost structures.”

Connolly further explained, “The combined company will be the number three player in frozen.” He expects Bird’s Eye and Jimmy Dean to secure the company’s standing.

Company officials are specifically optimistic about frozen vegetables, which Connolly said will close the “vegetable gap.” Connolly said consumers “need to get a certain number of servings of vegetables in their diet every day, and they come up short most days.” Frozen products provide consumers with a simple, healthy, and tasty option.

Throughout the transition, Hillshire Brands has committed to maintaining their current dividend of 70 cents per share. However, the company plans to temporarily suspend their share buyback program.

The acquisition is being overseen by Centerview Partners and Goldman Sachs. As reported by Yahoo News, Goldman Sachs & Co has committed to financing the purchase.

The purchase is expected to close without incident, as Blackstone affiliates have committed to approving the acquisition. Blackstone currently owns nearly 51 percent of Pinnacle Foods’ common stock.

The merger of Hillshire and Pinnacle Foods is expected to benefit both companies and their customers.

[Image via Eckrich.com]

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