Conagra's Acquisition Of Pinnacle Foods: What You Need To Know

Packaged food giant Conagra Brands Inc (NYSE: CAG) confirmed Wednesday morning it has reached an agreement to acquire Pinnacle Foods Inc (NYSE: PF) for $8.1 billion, or $10.9 billion including debt. The deal announcement sent shares of Conagra lower by nearly 9 percent while Pinnacle Foods' stock dipped nearly 4 percent.

What Happened

Conagra, the parent company of multiple food brands including Pam cooking spray and Hebrew National hot dogs, will pay Pinnacle shareholders $43.11 per share in cash plus 0.6494 shares of Conagra common stock for each share of Pinnacle Foods held. The deal implies a value of $68 per Pinnacle Foods share, which is a slight premium to Tuesday's closing price of $67.86.

Why It's Important

The combination of the two companies will create a food giant with a large presence in the frozen section in grocery stores, according to CNBC. The deal would make the combined entity the second-largest U.S. frozen food company and comes at a time when the frozen food category is seeing a resurgence.

Conagra expects the deal to generate $215 million in annual run-rate cost synergies by the end of fiscal 2022. The deal is expected to be accretive to Conagra's EPS by a single digit in the fiscal year ending May 2020 and by a high single digit in the fiscal year ended May 2022.

What's Next

"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," Conagra President and CEO Sean Connolly said in a statement. "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."

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