Conagra Brands and Pinnacle Foods Announced Definitive Agreement

Conagra Brands and Pinnacle Foods Announced Definitive Agreement

Conagra Brands, Inc and Pinnacle Foods Inc announced that their boards of directors have unanimously approved a definitive agreement under which the former will acquire all outstanding shares of the latter in a cash and stock transaction valued at approximately $10.9 billion, including Pinnacle Foods’ outstanding net debt.

Under the terms of the transaction, Pinnacle Foods shareholders will receive $43.11 per share in cash and 0.6494 shares of Conagra Brands common stock for each share of Pinnacle Foods held. The implied price of $68 per Pinnacle Foods share is based on the volume-weighted average price of Conagra Brands’ stock for the five days ended June 21, 2018.

The purchase price reflects an adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) multiple of 15.8 times, based on Pinnacle Foods’ estimated fiscal year 2018 results excluding synergies, and 12.1 times adjusted EBITDA, including run-rate cost synergies.

Complementary portfolio of iconic brands: The combined company will have a portfolio of leading, iconic brands within attractive domains such as frozen and refrigerated meals and snacks and sweet treats

Enhanced ability to capitalise on trends in frozen foods: The combination will bring together complementary portfolios in the large, growing and on-trend frozen foods category, positioning the combined company to accelerate innovation and benefit from long-term tailwinds.

Compelling growth profile: Conagra Brands and Pinnacle Foods are two of the fastest-growing companies in the consumer packaged foods industry by consumption, and Conagra Brands expects continued momentum based on the enhanced scale and new opportunities to partner with customers that the transaction will provide.

Conagra Brands expects to achieve approximately $215 million in annual run-rate cost synergies by the end of fiscal year 2022, with one-time cash costs to achieve the synergies estimated at approximately $355 million, inclusive of expected capital expenditures of approximately $150 million.

Financing maintains solid investment grade credit rating and dividend rate: The transaction is expected to be financed by Conagra Brands equity issued to Pinnacle Foods shareholders, new transaction debt and incremental cash proceeds from a public equity offering and/or divestitures.

Proven integration capabilities: In recent years, Conagra Brands has established a proven track record of executing strategic transactions. The two organisations share complementary portfolios, supply chains and result-oriented cultures, which are expected to facilitate integration.

Under the terms of the agreement, each share of Pinnacle Foods’ common stock will be converted into the right to receive $43.11 per share in cash and 0.6494 shares of Conagra Brands’ common stock.

Conagra Brands has secured $9 billion in fully committed bridge financing from affiliates of Goldman Sachs Group, Inc.

The $10.9 billion purchase price is expected to be financed with $3 billion of Conagra Brands’ equity issued to Pinnacle Foods shareholders and $7.9 billion in cash consideration, funded with $7.3 billion of transaction debt and approximately $600 million of incremental cash proceeds from a public equity offering and/or divestitures.

Goldman Sachs and Centerview Partners are acting as financial advisors to Conagra Brands, and Jones Day is acting as its legal advisor.

Evercore and Credit Suisse are acting as financial advisors to Pinnacle Foods and Cravath Swaine and Moore LLP is acting as its legal advisor. Morgan Stanley and Rothschild & Co. provided strategic advice to Pinnacle Foods.

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