Conagra Brands has reportedly approached packaged food company Pinnacle Foods with a view to a takeover, just two days after selling its Wesson brand of oils to JM Smucker.
Reuters claimed that Pinnacle – the producer of frozen food brands like Birds Eye and Aunt Jemima, as well as grocery lines including Vlasic pickles – has a market value of around $7.2 billion.
That represents a significant premium on the $4.3 billion sale price floating around Pinnacle Foods in 2014. Hillshire Brands – led at the time by current Conagra chief executive Sean Connolly – had agreed a deal for Pinnacle before withdrawing and submitting to a $7.7 billion takeover from Tyson Foods.
What was billed initially as ‘a merger of meat and vegetables’ became a consolidation of two sizeable US meat companies as Tyson Foods bought out Hillshire Brands – a deal that was largely more popular with investors than the proposed merger with Pinnacle Foods.
But since that time, Pinnacle’s net sales have also increased significantly – from $2.59 billion in 2014 to $3.13 billion last year. Gross profit increased from $188,000 in 2014 to $916,000 last year, representing an improved margin and showing that the business is in a fitter, leaner state.
Reuters said that continued interest in Pinnacle “underscores the need for further consolidation in the frozen food and condiments sectors, as sales continue to decline with consumers opting for healthier choices”. In Europe, frozen food company Nomad Foods has consistently sought to buy its way into growth, looking for additions to its €2.6 billion takeover of Iglo Group in 2015 with a €600 million M&A fund at its disposal.
Neither Conagra nor Pinnacle commented on reports of a merger, though Pinnacle’s share price jumped 8% on news of the approach.
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