Conagra Brands Inc. agreed to acquire Pinnacle Foods Inc. PF for $8.2 billion in cash and stock, as the owner of the Healthy Choice brand looks to build on its recent frozen-food growth by adding Birds Eye products.
Under Chief Executive Sean Connolly, Conagra has focused on revamping older brands like Healthy Choice, Marie Callender’s and Banquet. As a result, Conagra’s refrigerated and frozen food segment has been the company’s fastest-growing division, with sales rising 3.8% in the most-recent fiscal year, amid a sluggish packaged-food market.
The Pinnacle acquisition would add frozen-food brands such as Hungry-Man TV dinners, Celeste pizza and Mrs. Paul’s fish products, along with other notable labels like Duncan Hines, Mrs. Butterworth’s, Vlasic and Wish-Bone. Conagra’s other brands include Reddi-wip, Orville Redenbacher’s and Hunt’s tomato products.
The combined company would have total sales of about $11 billion, based on the companies’ latest fiscal years.
The deal values Pinnacle at $68 a share, a slim premium to the stock’s close Tuesday of $67.86 amid reports of a possible deal. Under the deal’s terms, Pinnacle shareholders will swap each share for $43.11 in cash and 0.6494 Conagra shares.
In morning trading, Conagra shares fell 6.7% to $35.65, while Pinnacle Foods declined 4% to $65.15.
Packaged-food companies have had to adjust to shifting eating and grocery-shopping habits by Americans, shepherded in by millennials and the internet. Stalwart food brands no longer can consistently command higher prices from retailers.
Mr. Connolly has called out rival food companies for neglecting brands and letting bureaucracy impede innovation. Walking down the frozen-food aisle, “you’ll still find plenty of products that look like they’re left over from the 1980s and 1990s,” he said at a conference last month.
Last year, Conagra freshened up its frozen brands, helping them find new popularity among health-conscious shoppers. Healthy Choice, a diet brand launched in 1989, rolled out new microwavable meal bowls with trendy ingredients like edamame, kale and quinoa, and exotic flavors like Cuban pork and Korean beef.
Pinnacle shareholders will own 16% of the combined company. Both companies said they plan to maintain their quarterly dividends at current levels.
The $10.9 billion deal including debt will be financed with $3 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 $600 million of incremental cash proceeds.
The deal is expected to close by the end of 2018.
Also on Wednesday Conagra said its fourth-quarter profit from continuing operations fell to 18 cents a share from 36 cents a share from a year earlier. On an adjusted basis, the company earned 50 cents a share. Net sales rose 5.6% to $1.97 billion.
Corrections & Amplifications Conagra’s dividend is paid at an annual rate of 85 cents a share; Pinnacle Foods’s dividend is paid at an annual rate of $1.30 a share. Earlier versions of this story misstated the dividends at the two companies.