Conagra buying Pinnacle Foods in $10.9 billion deal | Big
28 Juin, 2018, 11:42 | Auteur: Auguste Feret
But investors were skeptical of the combination, and shares of both companies fell.
The company that owns such iconic brands such as Birds Eye and Duncan Hines is joining a family of names featuring Hunts and Healthy choice.
The deal comes amid optimism for supermarket freezer sections after years of disappointing sales. As a result, Conagra's refrigerated and frozen food segment has been the company's fastest-growing division, with sales rising 3.8% in the most-recent fiscal year, amid a sluggish.
What's more, Chicago-based Conagra said the acquisition will further its multiyear transformation plan and bolster its capabilities in its most strategic categories.
Dewey Warner, a research analyst with Euromonitor, said frozen food sales have improved in large part because manufacturers have finally invested in revamping "stale, processed, traditional TV dinners" to make them more on-trend with simpler ingredient lists that seem less processed and new flavors.
Together, Conagra and Pinnacle would form a food company with pro forma annual net sales of about $11 billion.
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The deal also marks the latest shift in the reconfiguration of the USA food industry. The other $7.9 billion would go to shareholders as cash - $43.11 per share of Pinnacle stock - and cover Pinnacle's debt, the companies said.
"Our best guess: Perhaps a couple of brands will need to be divested, but the deal - if the two parties agree to combine - likely would pass regulatory muster", JP Morgan analyst Ken Goldman wrote in a note.
Pinnacle shareholders are expected to own approximately 16 percent of the combined company.
"Today's transaction provides Pinnacle Foods shareholders with substantial and immediate value, as well as the opportunity to participate in the significant upside potential of the combined company", Pinnacle CEO Mark Clouse said.
Pinnacle shares were down almost 3 per cent and Conagra's stock was up marginally in premarket trading. It is expected to close by the end of calendar 2018.
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