Hillshire Brands buying Pinnacle Foods for $4.23B

CHICAGO - Hillshire Brands (HSH) is buying Pinnacle Foods (PF), whose brands include Duncan Hines, Bird's Eye, Hungry Man and Aunt Jemima, in a cash-and-stock deal valued at approximately $4.23 billion.

The deal would expand Hillshire Brands' portfolio which includes Jimmy Dean sausage, Ball Park franks and Sara Lee frozen bakery goods.

Shares of both companies rose in premarket trading on word of the deal on Monday.

"The new Hillshire Brands will have a strengthened position in frozen foods, new opportunities in the center store for our brands and in refrigerated for Pinnacle Foods' brands," Hillshire President and CEO Sean Connolly said in a statement.

The combined company, which is expected to have annual revenue of approximately $6.6 billion, will use the Hillshire Brands name and be based in Chicago. Connolly will serve as its president and CEO.

Each share of Parsippany, New Jersey-based Pinnacle Foods Inc. common stock will be exchanged for $18 in cash and 0.50 shares of Hillshire Brands Co. common stock. The companies said Monday that the implied purchase price is $36.02 per share.

That's an 18 percent premium to Pinnacle's Friday closing price of $30.45. Pinnacle went public in March 2013.

The companies put the deal's total value at about $6.6 billion, which includes Pinnacle's outstanding debt.

Pinnacle shareholders will own about 33 percent of the combined company.

The combined company is expected to have an estimated $140 million in annual cost savings by the end of the third year. Hillshire anticipates that it will maintain its annual dividend of 70 cents per share and suspend a previously announced stock repurchase program.

Both companies' boards unanimously approved the acquisition, which is expected to close by September. It still needs shareholder approval.

Pinnacle Foods shares rose $7.20, or 23.7 percent, to $37.65 in premarket trading two hours ahead of the market open. Hillshire Brands shares rose $2.25, or 6.1 percent, to $39.20.