​Hillshire Acquires Pinnacle Foods Sending Shares Upward

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May 13, 2021

Hillshire Brands Co. has agreed to purchase Pinnacle Foods Inc. for about $4.3 billion on May 12. The acquisition is Hillshire Chief Executive Officer Sean Connolly’s third in the past year.

Connolly is working to reduce his company’s dependence on Jimmy Dean meats and add the healthy products consumers are increasingly seeking. While Pinnacle owns brands from Vlasic pickles to Wish-Bone salad dressings, it’s the company’s Birds Eye frozen vegetables that Connolly may have been most interested in.

“Frozen food is an attractive platform to provide healthy options,” Nicholas Fereday, an analyst at Rabobank International in New York, said in an e-mail. “They see this as one of the more sustainable food trends, not a fad.”

Pinnacle investors will receive $18 in cash and half a share of Hillshire Brands for every Pinnacle share they own, the companies said today in a statement. The total amount is almost 20 percent higher than Pinnacle’s closing price on May 9, the most recent trading day. Including debt, the deal is valued at about $6.6 billion.

Shares of Chicago-based Hillshire fell 5.7 percent to $34.86 at 10:15 a.m. in New York. Pinnacle, based in Parsippany, New Jersey, jumped 15 percent to $35.

Pinnacle is selling itself after only about a year as a publicly traded company. Blackstone Group LP (BX) had acquired the foodmaker for $2.2 billion about seven years ago and took it public again in March 2013.

Pinnacle serves more than 85 percent of American households and has a No. 1 or No. 2 market position in 10 of 13 grocery categories in which it competes, according to the statement. The company’s other brands include Mrs. Butterworth’s and Log Cabin syrups, Duncan Hines baking mixes, Van de Kamp’s frozen fish and Lender’s bagels.

The combination with Hillshire is expected to produce $140 million in annual savings from improving the supply chain and consolidating expenses.

Hillshire, which had about $4 billion in revenue in fiscal year 2013, agreed to buy Van’s Natural Foods for about $165 million last month. The company also bought gourmet jerky maker Golden Island for $35 million in September. Pinnacle (PF) last year bought Unilever’s Wish-Bone salad dressings unit for $580 million.

Both Pinnacle and Hillshire have been cited as possible bidders for Unilever’s Ragu pasta sauces unit. Unilever confirmed last month that it was reviewing Ragu and the Slim Fast diet-food unit as part of CEO Paul Polman’s ongoing pruning of food brands. Ragu may fetch as much as $2 billion, people familiar with the matter have said.