CHICAGO and PARSIPPANY, N.J., June
27, 2018 /PRNewswire/ -- Conagra Brands, Inc. (NYSE:
CAG) and Pinnacle Foods Inc. (NYSE: PF) today announced that their
boards of directors have unanimously approved a definitive
agreement under which Conagra Brands will acquire all outstanding
shares of Pinnacle Foods 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 $68.00 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 EBITDA multiple of 15.8x, based
on Pinnacle Foods' estimated fiscal year 2018 results excluding
synergies, and 12.1x adjusted EBITDA including run-rate cost
synergies.
The combination of two growing portfolios of iconic brands will
serve as a catalyst to accelerate value creation for shareholders.
The transaction will enhance Conagra Brands' multi-year
transformation plan and expand its presence and capabilities in its
most strategic categories, including frozen foods and snacks. With
annual net sales in excess of $3
billion, Pinnacle Foods' portfolio of frozen, refrigerated
and shelf-stable products includes such well-known brands as
Birds Eye, Duncan Hines, Earth
Balance, EVOL, Erin's, Gardein, Glutino, Hawaiian Kettle Style
Potato Chips, Hungry-Man, Log Cabin, Tim's Cascade Snacks, Udi's,
Vlasic and Wish-Bone, among others. Based on both
companies' latest fiscal year results, pro forma net sales would
have been approximately $11
billion.
"The acquisition of Pinnacle Foods is an exciting next step for
Conagra Brands. After three years of transformative work to create
a pure-play, branded food company, we are well-positioned to
accelerate the next wave of change," said Sean Connolly, president and chief executive
officer of Conagra Brands. "The addition of Pinnacle Foods' leading
brands in the attractive frozen foods and snacks categories will
create a tremendous opportunity for us to further leverage our
proven innovation approach, brand-building capabilities, and deep
customer relationships. With greater scale across leading, iconic
brands, an unwavering focus on driving profitable growth, and a
strong balance sheet and cash flow, we are creating a tremendous
platform to drive meaningful shareholder value."
"Today's transaction provides Pinnacle Foods shareholders with
substantial and immediate value, as well as the opportunity to
participate in the significant upside potential of the combined
company," said Pinnacle Foods chief executive officer Mark Clouse. "Because of our employees'
incredible work, Pinnacle's total shareholder return is
approximately 275 percent since our IPO, and today marks an
important milestone in the company's journey. The portfolios and
capabilities of both enterprises are impressive and complementary.
We look forward to working through a seamless transition with the
Conagra Brands team."
Compelling Strategic and Financial Benefits
- Complementary Portfolio of Iconic Brands: The combined
company will have a portfolio of leading, iconic brands within
attractive domains such as frozen & refrigerated meals and
snacks & sweet treats.
- Enhanced Ability to Capitalize 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.
- EPS Accretive: On a percentage basis, Conagra Brands
expects the transaction to be low single-digit accretive to
adjusted EPS in the fiscal year ended May
2020 and high single-digit accretive to adjusted EPS in the
fiscal year ended May 2022.
- Significant Synergy Opportunities: 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 organizations share complementary
portfolios, supply chains, and results-oriented cultures, which are
expected to facilitate integration.
Transaction Details
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 $9.0
billion in fully committed bridge financing from affiliates
of Goldman Sachs Group, Inc. ("Goldman Sachs"). The $10.9 billion purchase price is expected to be
financed with $3.0 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. On a pro forma basis, Pinnacle Foods
shareholders are expected to own approximately 16% of the combined
company, assuming issuance of the incremental equity to the public.
Following the transaction, Conagra Brands' pro forma net
debt-to-EBITDA ratio is expected to be approximately
5.0x. Conagra Brands is committed to maintaining a solid
investment grade credit rating and targeting a debt-to-EBITDA ratio
of 3.5x.
Conagra Brands intends to maintain its quarterly dividend at the
current annual rate of $0.85 per
share during fiscal 2019. In the future, it expects modest dividend
increases while it focuses on deleveraging, subject to the approval
of its board of directors. The company also plans to repurchase
shares under its authorized program only at times and in amounts as
is consistent with the prioritization of achieving its leverage
targets.
Pinnacle Foods will continue to pay its quarterly dividend at
the current annual rate of $1.30 per
share until the transaction is completed.
The transaction is expected to close by the end of calendar
2018, subject to the approval of Pinnacle Foods shareholders, the
receipt of regulatory approvals and other customary closing
conditions.
Advisors
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 & Moore LLP is acting as its legal advisor.
Morgan Stanley and Rothschild & Co. provided strategic advice
to Pinnacle Foods.
Conference Call and Webcast Information
Conagra Brands will host a webcast and conference call at
9:30 AM Eastern Time today to discuss
the transaction as well as its fourth quarter and full year Fiscal
2018 results, which were announced separately today. The conference
call has been rescheduled to today from its originally-scheduled
date of Thursday, June 28. The live
audio webcast and presentation slides will be available on
conagrabrands.com/investor-relations under Events &
Presentations. The conference call may be accessed by dialing
1-877-883-0383 for participants in the continental U.S. and
1-412-902-6506 for all other participants and using passcode
8320318. Please dial-in 10 to 15 minutes prior to the call start
time. Following the Company's remarks, the conference call will
include a question-and-answer session with the investment
community.
A replay of the webcast will be available on
conagrabrands.com/investor-relations under Events &
Presentations until June 27,
2019.
Additional information about the transaction can also be found
at www.conagraandpinnacle.transactionannouncement.com.
About Conagra Brands
Conagra Brands, Inc. (NYSE: CAG), headquartered in Chicago,
is one of North America's leading branded food companies.
Guided by an entrepreneurial spirit, Conagra Brands combines a rich
heritage of making great food with a sharpened focus on innovation.
The company's portfolio is evolving to satisfy people's changing
food preferences. Conagra's iconic brands, such as Marie
Callender's®, Reddi-wip®, Hunt's®, Healthy Choice®, Slim Jim®
and Orville Redenbacher's®, as well as emerging brands,
including Alexia®, Blake's®, Frontera®, Duke's® and Angie's®
BOOMCHICKAPOP®, offer choices for every occasion. For more
information, visit www.conagrabrands.com.
About Pinnacle Foods
Pinnacle Foods Inc. (NYSE:PF) is a leading manufacturer,
marketer and distributor of high-quality branded food products with
a mission of unleashing brand potential. With annual sales in
excess of $3 billion, our portfolio includes well-known brands
competing in frozen, refrigerated and shelf-stable formats, such as
Birds Eye, Birds Eye Voila!, Duncan Hines, Earth Balance, EVOL, Gardein,
Glutino, Hungry-Man, Log Cabin, Udi's, Vlasic, and
Wish-Bone, along with many others. The company is
headquartered in Parsippany, NJ and has nearly 5,500
employees across the U.S. and Canada. For more information,
please visit www.pinnaclefoods.com.
Note on Forward-looking Statements
This document contains forward-looking statements within the
meaning of the federal securities laws. These forward-looking
statements are based on management's current expectations and are
subject to uncertainty and changes in circumstances. Readers of
this document should understand that these statements are not
guarantees of performance or results. Many factors could affect our
actual financial results and cause them to vary materially from the
expectations contained in the forward-looking statements, including
those set forth in this document. These risks and uncertainties
include, among other things: the failure to obtain Pinnacle Foods
shareholder approval of the proposed transaction; the possibility
that the closing conditions to the proposed transaction may not be
satisfied or waived, including that a governmental entity may
prohibit, delay or refuse to grant a necessary regulatory approval
and any conditions imposed on the combined entity in connection
with consummation of the proposed transaction; delay in closing the
proposed transaction or the possibility of non-consummation of the
proposed transaction; the risk that the cost savings and any other
synergies from the proposed transaction may not be fully realized
or may take longer to realize than expected, including that the
proposed transaction may not be accretive within the expected
timeframe or to the extent anticipated; the occurrence of any event
that could give rise to termination of the merger agreement; the
risk that shareholder litigation in connection with the proposed
transaction may affect the timing or occurrence of the proposed
transaction or result in significant costs of defense,
indemnification and liability; risks related to the disruption of
the proposed transaction to us and our management; the effect of
the announcement of the proposed transaction on our ability to
retain and hire key personnel and maintain relationships with
customers, suppliers and other third parties; the ability and
timing to obtain required regulatory approvals and satisfy other
closing conditions for the pending divestiture of our Del Monte processed fruit and vegetable business
in Canada; our ability to achieve
the intended benefits of recent and pending acquisitions and
divestitures, including the recent spin-off of our Lamb Weston
business; the continued evaluation of the role of our Wesson oil
business; general economic and industry conditions; our ability to
successfully execute our long-term value creation strategy; our
ability to access capital on acceptable terms or at all; our
ability to execute our operating and restructuring plans and
achieve our targeted operating efficiencies from cost-saving
initiatives and to benefit from trade optimization programs; the
effectiveness of our hedging activities and our ability to respond
to volatility in commodities; the competitive environment and
related market conditions; our ability to respond to changing
consumer preferences and the success of our innovation and
marketing investments; the ultimate impact of any product recalls
and litigation, including litigation related to the lead paint and
pigment matters; actions of governments and regulatory factors
affecting our businesses, including the ultimate impact of recently
enacted U.S tax legislation and related regulations or
interpretations; the availability and prices of raw materials,
including any negative effects caused by inflation or weather
conditions; risks and uncertainties associated with intangible
assets, including any future goodwill or intangible assets
impairment charges; the costs, disruption, and diversion of
management's attention associated with campaigns commenced by
activist investors; and other risks described in our reports filed
from time to time with the Securities and Exchange Commission. We
caution readers not to place undue reliance on any forward-looking
statements included in this document, which speak only as of the
date of this document. We undertake no responsibility to update
these statements, except as required by law.
Note on Non-GAAP Financial Measures
This document includes certain non-GAAP financial measures,
including adjusted diluted EPS from continuing operations, organic
net sales, adjusted gross profit, adjusted operating profit,
adjusted gross margin, and adjusted operating margin. Management
considers GAAP financial measures as well as such non-GAAP
financial information in its evaluation of the Company's financial
statements and believes these non-GAAP measures provide useful
supplemental information to assess the Company's operating
performance and financial position. These measures should be viewed
in addition to, and not in lieu of, the Company's diluted earnings
per share, operating performance and financial measures as
calculated in accordance with GAAP.
Certain of these non-GAAP measures, such as organic net sales,
adjusted operating margin, and adjusted diluted EPS from continuing
operations, are forward-looking. Historically, the Company
has excluded the impact of certain items impacting comparability,
such as, but not limited to, restructuring expenses, the impact of
the extinguishment of debt, the impact of foreign exchange, the
impact of acquisitions and divestitures, hedging gains and losses,
impairment charges, the impact of legacy legal contingencies, and
the impact of unusual tax items, from the non-GAAP financial
measures it presents. Reconciliations of these
forward-looking non-GAAP financial measures to the most directly
comparable GAAP financial measures are not provided because the
Company is unable to provide such reconciliations without
unreasonable effort, due to the uncertainty and inherent difficulty
of predicting the occurrence and the financial impact of such items
impacting comparability and the periods in which such items may be
recognized. For the same reasons, the Company is unable to
address the probable significance of the unavailable information,
which could be material to future results.
Hedge gains and losses are generally aggregated, and net amounts
are reclassified from unallocated corporate expense to the
operating segments when the underlying commodity or foreign
currency being hedged is expensed in segment cost of goods sold.
The Company identifies these amounts as items that impact
comparability within the discussion of unallocated Corporate
results.
Additional Information and Where to Find It
In connection with the proposed transaction, Conagra Brands will
file a registration statement on Form S-4 with the SEC. INVESTORS
AND SECURITY HOLDERS ARE ENCOURAGED TO READ THE REGISTRATION
STATEMENT AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC,
INCLUDING THE PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE
REGISTRATION STATEMENT, WHEN THEY BECOME AVAILABLE, BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
The final proxy statement/prospectus will be mailed to stockholders
of Pinnacle Foods. Investors and security holders will be able to
obtain the documents free of charge at the SEC's website,
www.sec.gov, from Pinnacle Foods at its website,
www.pinnaclefoods.com, or by contacting the Pinnacle Foods Investor
Relations department at 1-973-541-8629, or from Conagra Brands at
its website, www.conagrabrands.com, or by contacting the Conagra
Brands Investor Relations department at 1-312-549-5002.
Participants in Solicitation
Conagra Brands and Pinnacle Foods and their respective directors
and executive officers may be deemed to be participants in the
solicitation of proxies in respect of the proposed transaction.
Information concerning Conagra Brands' participants is set forth in
the proxy statement, filed August 11,
2017, for Conagra Brands' 2017 annual meeting of
stockholders as filed with the SEC on Schedule 14A. Information
concerning Pinnacle Foods' participants is set forth in the proxy
statement, filed April 20, 2018, for
Pinnacle Foods' 2018 annual meeting of stockholders as filed with
the SEC on Schedule 14A. Additional information regarding the
interests of such participants in the solicitation of proxies in
respect of the proposed transaction will be included in the
registration statement and proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become
available.
For more information, please contact:
Conagra Brands:
MEDIA: Mike Cummins
312-549-5257
Michael.Cummins@conagra.com
INVESTORS: Brian Kearney
312-549-5002
ir@conagra.com
Pinnacle Foods:
MEDIA: Janice Monahan
973-541-8620
mediainquiries@pinnaclefoods.com
INVESTORS: Jennifer Halchak
973-541-8629
Jennifer.Halchak@pinnaclefoods.com
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SOURCE Conagra Brands, Inc.
