Accessibility/Mobile Features
Skip Navigation
Skip to Content
Editorial News
Classified Sites

The Canadian Press - ONLINE EDITION

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

FILE - In a Monday, Feb. 12, 2007, file photo, bottles of Mrs. Butterworth's Original Syrup are displayed in a store, in Princeton, N.J. Hillshire Brands is buying Pinnacle Foods, whose brands include Duncan Hines and Mrs. Butterworth's, in a cash-and-stock deal valued at approximately $4.23 billion, the companies announced Monday, May 12, 2014. Hillshire Brands’ roster of brands include Jimmy Dean meats, Ball Park hot dogs and Sara Lee frozen bakery goods. The combined company will use the Hillshire Brands name and be based in Chicago. (AP Photo/Mel Evans, File)

Enlarge Image

FILE - In a Monday, Feb. 12, 2007, file photo, bottles of Mrs. Butterworth's Original Syrup are displayed in a store, in Princeton, N.J. Hillshire Brands is buying Pinnacle Foods, whose brands include Duncan Hines and Mrs. Butterworth's, in a cash-and-stock deal valued at approximately $4.23 billion, the companies announced Monday, May 12, 2014. Hillshire Brands’ roster of brands include Jimmy Dean meats, Ball Park hot dogs and Sara Lee frozen bakery goods. The combined company will use the Hillshire Brands name and be based in Chicago. (AP Photo/Mel Evans, File)

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 cake 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 foods 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.

Hillshire, which has been struggling with weak sales, also said last month that 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 meat have hurt Hillshire's profit 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 acquisition, 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 should generate $140 million in annual 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. The companies said investment firm Blackstone, which owns a 51 per cent stake of Pinnacle's outstanding stock, agreed to the deal.

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.

  • Rate this Rate This Star Icon
  • This article has not yet been rated.
  • We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high. If you thought it was well written, do the same. If it doesn’t meet your standards, mark it accordingly.

    You can also register and/or login to the site and join the conversation by leaving a comment.

    Rate it yourself by rolling over the stars and clicking when you reach your desired rating. We want you to tell us what you think of our articles. If the story moves you, compels you to act or tells you something you didn’t know, mark it high.

Sort by: Newest to Oldest | Oldest to Newest | Most Popular 0 Commentscomment icon

You can comment on most stories on brandonsun.com. You can also agree or disagree with other comments. All you need to do is register and/or login and you can join the conversation and give your feedback.

There are no comments at the moment. Be the first to post a comment below.

Post Your Commentcomment icon

Comment
  • You have characters left

The Brandon Sun does not necessarily endorse any of the views posted. Comments are moderated before publication. By submitting your comment, you agree to our Terms and Conditions. New to commenting? Check out our Frequently Asked Questions.

letters

Make text: Larger | Smaller

Brandon Sun Business Directory
Sudden Surge: Flood of 2014
Opportunity Magazine — The Bakken
Why Not Minot?
Welcome to Winnipeg

Social Media