US - Hillshire Brands is to take over Pinnacle Foods in a cash and stock deal to acquire all Pinnacle’s remaining shares.
Under the terms of the agreement, each share of Pinnacle Foods common stock will be exchanged for $18.00 in cash and 0.50 shares of Hillshire Brands common stock.
The total enterprise value of the transaction is approximately $6.6 billion, including Pinnacle Foods’ outstanding net debt, which reflects an adjusted EBITDA multiple of 9.6 times.
The transaction brings together two highly complementary businesses with leading, iconic brands to create a diversified food company with estimated pro forma 2014 sales of $6.6 billion.
On a combined basis, the companies will have leading positions in key frozen, refrigerated and centre of store grocery categories.
The fixed exchange ratio of 0.50 shares of Hillshire Brands common stock was determined based on the 10 day average closing price of Hillshire Brands as of 9 May.
The implied purchase price based on this average is $36.02 per share and represents an 18 per cent premium to the price of Pinnacle Foods’ common stock.
In conjunction with the agreement, certain affiliates of Blackstone, which collectively hold approximately 51 per cent of Pinnacle Foods’ outstanding common stock, have entered into a voting agreement and, subject to its terms and conditions, agreed to vote their shares in favour of the transaction.
The transaction was unanimously approved by the boards of directors of both companies and is expected to close by September 2014, subject to shareholder and regulatory approvals and other customary closing conditions.
“The combination of Hillshire Brands and Pinnacle Foods brings together two highly complementary organisations with strong brands, skilled employees and lean cost structures,” said Sean Connolly, president and chief executive officer of Hillshire Brands.
“The acquisition creates a leading branded food company with enhanced scale, reach, and capabilities while providing margin expansion and strong EPS accretion.
“The new Hillshire Brands will have a strengthened position in frozen foods, new opportunities in the centre store for our brands and in refrigerated for Pinnacle Foods’ brands.
“We believe our increased scale combined with a more diversified portfolio will deliver strong, consistent cash flows. This will enable us to continue to invest in our brands, enhance our portfolio, pursue value accretive M&A and deliver significant long-term value to our shareholders.”
“This compelling transaction offers Pinnacle Foods shareholders an immediate premium and the opportunity to participate in the tremendous potential of the combined organisation,” said Bob Gamgort, chief executive officer of Pinnacle Foods.
“The complementary portfolios and strategic fit of these two companies create significant value for the shareholders of both organisations. Our common passion for developing innovative products and maintaining close ties with our customers will position the combined entity to deliver outstanding benefits for employees, customers and shareholders.”
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