Conagra creates frozen food giant with $8.1bn deal

Bloomberg

Conagra Brands Inc. agreed to buy Pinnacle Foods Inc. for about $8.1 billion in cash and stock, gaining freezer-aisle brands such as Birds Eye to capitalise on growing demand for frozen foods.
The deal values Pinnacle at $68 a share, the companies said in a statement. The price is 23 percent above Pinnacle’s closing level on April 19, when an activist investor disclosed a stake in the Parsippany, New Jersey-based company and began pushing it to sell itself. Bloomberg News reported last week that Conagra had approached Pinnacle about a deal. Including assumed debt, the deal values Pinnacle at about $10.9 billion.
The purchase will give Chicago-based Conagra more exposure to one of the few bright spots in the grocery store: Frozen food sales are growing after years of decline. Even millennials, known for their foodie tastes, are embracing frozen meals, which are convenient and less expensive than takeout.
More than half of Pinnacle’s revenue comes from frozen brands including Birds Eye, Van de Kamp’s and the Gardein line of vegetarian products.
Takeover speculation has lifted Pinnacle shares 28 percent from their low for the year on April 2.
The pressure on packaged-food makers to get bigger has intensified in the aftermath of Whole Foods Market Inc.’s sale last year to Amazon.com Inc.
Frozen food, however, is considered relatively resistant to Amazon’s push to get shoppers to buy more groceries online because they’re tricky to deliver.
Activist fund Jana Partners urged Pinnacle to explore a sale after reporting a 9.5 percent stake in the packaged food maker in April.
The New York-based hedge fund, run by Barry Rosenstein, said in a filing then that it thought the company was in a good position to consider consolidation given its strength in the frozen foods industry.
Jana also has history with Conagra, which in 2015 agreed to add two directors to its board in a settlement with the fund. It currently owns a stake in Conagra
of less than 1 percent, according to data compiled by Bloomberg. Conagra’s brands include Banquet, Marie Callender’s and P.F. Chang’s Home Menu.