Trying to grab a bigger share of the fast growing snack and frozen food markets amid fierce competition in the packaged food industry, Conagra Brands Inc have said that it would buy Pinnacle Foods Inc for about $8.1 billion.
The cash-and-stock deal will make Conagra the No.2 U.S. frozen food maker by sales after Nestle. The deal comes at a time when scale and negotiating power are crucial to packaged goods companies being squeezed by high commodities and freight costs and pressure from retailers for low pricing.
Conagra Chief Executive Officer Sean Connolly told the deal would help the company cut down on supply chain costs and strengthen its relationship with retailers.
“We can do a better job of filling full truckloads when we ship to our customers and work more efficiently,” Connolly said, adding that the company will use the cash from cost savings to invest more in developing its brands, reported Reuters.
Chicago-based Conagra said the two packaged food companies would have reported a combined $11 billion in full-year proforma net sales, with $4.9 billion in frozen food sales. It expects to save about $215 million by the end of the fiscal year 2022.
Pinnacle shareholders would get $43.11 per share in cash and 0.6494 Conagra shares for each Pinnacle share, implying an offer price of about $68 a share.
Including debt, the deal is valued at $10.9 billion. It is expected to close by the end of calendar 2018.