Hillshire Brands Buys Pinnacle Foods in $6.6 BIllion Deal

Hillshire Touts Enhanced Scale and Reach

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Hillshire Brands Co. agreed to buy Pinnacle Foods Inc. for about $6.6 billion including debt as the sausage producer expands in frozen-food offerings and adds products such as Duncan Hines baking mixes Vlasic pickles and Birds Eye vegetables.

Vlasic Farmer's Garden Pickles
Vlasic Farmer's Garden Pickles

The transaction will result in a payment of $18 in cash for each Pinnacle Foods share plus 0.5 shares of Hillshire Brands stock, Chicago-based Hillshire and Pinnacle said today in a statement. The price is about 20% higher than Pinnacle's closing price on May 9.

"The acquisition creates a leading branded food company with enhanced scale, reach and capabilities, while providing margin expansion" and growth in earnings per share, Sean Connolly, CEO of Hillshire Brands, said in the statement.

Hillshire Brands had $4 billion in revenue in fiscal year 2013, making products including Jimmy Dean sausages and Sara Lee frozen bakery goods. Pinnacle serves more than 85% 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.

Pinnacle's lead creative agency is BBDO, New York. HIllshire uses Y&R for Hillshire Farm and Ball Park Franks and TBWA Chiat Day for Jimmy Dean.

The deal comes less than a year after Pinnacle acquired Unilever's Wish-Bone salad dressings unit for $580 million. Both Pinnacle Foods and Hillshire have been talked of 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.

The purchase of Parsippany, New Jersey-based Pinnacle reflects a multiple of 9.6 times adjusted earnings before interest, taxes, depreciation and amortization, the companies said. Both boards have approved the deal, which is expected to close by September.

Hillshire last month agreed to buy Van's Natural Foods from private-equity firm Catterton Partners for about $165 million.

Hillshire was known as Sara Lee Corp. before spinning off its tea and coffee segment. It renamed itself Hillshire in June 2012 and appointed Connolly as CEO.

The company has since focused on improving lunch meat quality, creating new hot dog flavors and winning over more customers with lower-calorie breakfast sandwiches. The company's Jimmy Dean Delights bacon, egg and cheese breakfast sandwiches have 230 calories.

-- Bloomberg News --

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