Wednesday, September 2nd12.0°C
26775
26015

Hillshire Brands looks beyond meat products with Pinnacle acquisition at $4.23 billion

NEW YORK, N.Y. - Hillshire Brands is pushing further outside the deli case with a deal to buy the maker of Birds Eye frozen vegetables, Duncan Hines cakes mixes and Hungry-Man frozen dinners.

The Chicago-based company, which makes Hillshire Farm lunch meats, Jimmy Dean sausages and Ball Park franks, said Monday that it would buy Pinnacle Foods in a deal valued at $4.23 billion. The move extends Hillshire's reach into other sections of the supermarket as more Americans watch how much meat they're eating.

Among Pinnacle's other brands are Wish-Bone salad dressing, Celeste frozen pizzas and Vlasic pickles.

"Meats go with vegetables, sandwiches go with pickles," Hillshire CEO Sean Connolly said in explaining why the deal made sense during a conference call with analysts.

In a phone interview, Connolly noted that Americans are eating meat just as often, but less of it per meal. He said that actually benefits Hillshire because food products that incorporate different ingredients — such as its Jimmy Dean breakfast sandwiches — are more profitable than simpler items like lunchmeats or sausages.

"We've often said we like products that are more than just meat," Connolly said.

Last month, Hillshire also said it was buying Van's Natural Foods, which makes gluten-free products including cereal, chips and snack bars.

Given its reduced reliance on meat, the new Hillshire is expected to have significantly higher profit margins. Rising prices for fresh meat have hurt margins and led the company to increase prices in stores.

Still, some of Pinnacle's brands such as Hungry-Man are seen as having an outdated image at a time when many people are trying to move away from foods they feel are processed or unhealthy. On Tuesday, the frozen food industry even plans to launch its first TV ad defending the nutritional benefits of its products.

When asked whether Hillshire plans to hold onto all of Pinnacle's products, Connolly said it was "too early to tell," but noted Hillshire's record of focusing on its strongest brands. He added that Birds Eye, which has a more health-conscious image, was particularly attractive to Hillshire when evaluating the deal.

In a note to investors about the deal, J.P. Morgan analyst Ken Goldman declared the "strategic rationale unclear."

"Although we can see some logic behind the combination of lunchmeat and pickles, along with waffles and syrup, the connections seem a bit thinner than what we hope for in most food transactions," he wrote.

Connolly declined to specify the scope of the layoffs expected as a result of the acquisition. But he noted that the deal is expected to result in $140 million in annual cost savings from consolidated manufacturing and other overhead costs.

Each share of Parsippany, New Jersey-based Pinnacle Foods Inc. common stock will be exchanged for $18 in cash and 0.5 shares of Hillshire Brands Co. common stock. The companies said the implied purchase price is $36.02 per share, an 18 per cent premium to Pinnacle's Friday closing price.

Including Pinnacle's outstanding debt, they put the deal's total value at about $6.6 billion.

The combined company will use the Hillshire Brands name and be based in Chicago. Connolly will serve as its president and CEO.

Both companies' boards unanimously approved the acquisition, which is expected to close by September. It still needs shareholder approval.

Hillshire anticipates that it will maintain its annual dividend of 70 cents per share and suspend a previously announced stock repurchase program.

Pinnacle's shares rose 15 per cent to $34.92 and Hillshire's shares fell 6 per cent to $34.82.

The Canadian Press


Read more Business News

27613


Recent Trending




Today's Market
S&P TSX13481.90-377.22
S&P CDNX547.97-11.51
DJIA16058.35-469.68
Nasdaq4636.10-140.40
S&P 5001913.85-58.33
CDN Dollar0.7537-0.0009
Gold1136.20-2.50
Oil44.49-0.92
Lumber233.50-1.50
Natural Gas2.672-0.030

 
Okanagan Companies
Pacific Safety0.175-0.010
Knighthawk0.010.00
QHR Technologies Inc1.18-0.05
Cantex0.04-0.01
Anavex Life Sciences1.32-0.03
Metalex Ventures0.05-0.00
Russel Metals21.21-0.90
Copper Mountain Mining0.62-0.01
Colorado Resources0.085+0.010
ReliaBrand Inc0.0045+0.0005
Sunrise Resources Ltd0.015-0.005
Mission Ready Services0.085+0.000
Decisive Dividend Corp2.50-0.25

 



27504

FEATURED Property
24085657576 L&A Rd
3 bedrooms 1 baths
$279,500
more details
image2image2image2
Click here to feature your property
Please wait... loading


Agree to ask questions

Photo: Thinkstock.comThe STORY: I think, said Janet to herself, that I just figured out a solution to my problem of letting the prospect run the meeting.With that thought in mind, she got out of her c...


Your business is not a bank

Photo: Thinkstock.comYour plumbing business is not a bank. But when you are giving terms to customers that exceed what you get from your suppliers, you become one. And every time that someone does not...


Begin with the end in mind

Photo: ContributedWe humans love our dates: birthdays, anniversaries, 9/11, the Ides of March - our lives are intimately woven within the tapestry of the calendar. So it should come as no surprise whe...

_








Member of BC Press Council


26707