Hillshire Brands to acquire Pinnacle Foods for $6.6bn

US-based food company Hillshire Brands has signed an agreement to acquire packaged foods firm Pinnacle Foods for around $6.6bn, including debt.

The transaction will bring together two highly complementary businesses with leading brands, to create a diversified food company with estimated pro forma 2014 sales of $6.6bn.

The combined company will have leading positions in key frozen, refrigerated and centre of store grocery categories.

The implied purchase price is $36.02 per share, which represents an 18% premium to Pinnacle’s closing price on 9 May 2014.

The deal was unanimously approved by the boards of directors of both companies.

Subject to regulatory approvals and other customary closing conditions, the transaction is expected to be completed in September 2014.

Hillshire Brands president and CEO Sean Connolly said the acquisition will create a leading branded food company with enhanced scale, reach and capabilities, while providing margin expansion and strong EPS accretion.

"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," Connolly added.

According to Hillshire, the combined company will have a significantly expanded portfolio and enhanced operating capabilities such as high-quality brands; increased scale and presence in frozen, centre store and refrigerated; greater diversification; and enhanced operational platform.

The acquisiton will be immediately accretive to Hillshire Brands’ earnings.

Hillshire Brands has secured committed financing from Goldman, Sachs & Co for the deal.

The combined company will operate under the Hillshire Brands name, and will be headquartered in Chicago, Illinois.

Sean Connolly will serve as president and CEO of the combined company, while Hillshire Brands will appoint a representative from Blackstone to its board following the closing of the transaction.

Headquartered in Parsippany, New Jersey, Pinnacle Foods produces shelf-stable and frozen foods.

The company’s Duncan Hines grocery division manages brands such as Duncan Hines baking mixes and frostings, Vlasic and Vlasic Farmer’s Garden shelf-stable pickles, Wish-Bone and Western salad dressings and Mrs. Butterworth’s.

The Birds Eye Frozen division of Pinnacle includes Birds Eye, Birds Eye Steamfresh, C&W, McKenzie’s, and Freshlike frozen vegetables, while the Specialty Foods division comprises Cascade Snacks, Hawaiian kettle style potato chips, Erin’s popcorn and Snyder of Berlin.