Hillshire Brands To Buy Pinnacle Foods For $6.6 Bln - Quick Facts

(RTTNews) - Hillshire Brands Co. (HSH) has agreed to acquire all outstanding shares of Pinnacle Foods Inc. (PF) in a cash and stock deal. As part of the agreement, each Pinnacle Foods share would be exchanged for $18.00 cash and 0.50 common shares of Hillshire Brands. The total enterprise value of the deal is around $6.6 billion, including Pinnacle Foods' outstanding net debt, which reflects an adjusted EBITDA multiple of 9.6x.

The acquisition brings together two highly complementary businesses to create a diversified food company with estimated pro forma 2014 sales of $6.6 billion. On a combined basis, the companies would have leading positions in key frozen, refrigerated and center of store grocery categories.

The fixed exchange ratio of 0.50 shares of Hillshire Brands was determined based on the ten day average closing price of Hillshire Brands as of May 9, 2014. The implied purchase price based on this average is $36.02 per share and represents an 18% premium to the price of Pinnacle Foods' common stock based on the closing price on May 9, 2014.

In relation with the deal, certain affiliates of Blackstone, which collectively hold nearly 51% of Pinnacle Foods' outstanding stock, have reached a voting agreement and agreed to vote their shares in favor of the deal. The combination is expected to be immediately accretive to earnings. By the end of year three, Hillshire Brands expects the combined company to achieve $140 million in estimated annual cost synergies, derived mainly from supply chain enhancements and the consolidation of overhead expenses, and annual earnings per share accretion exceeding 15%.

With this transaction, the firm would also purchase Pinnacle Foods' tax assets with an estimated present value of some $390 million. The transaction may close by September 2014.