Pinnacle Food Is About To Be Acquired By Conagra Brands for Around $8.1 Billion

An announcement was made by Conagra Brands on Wednesday wherein they had mentioned their plans of acquiring Pinnacle Foods in a deal based on cash and stock, which is valued at around $8.1 billion. This emphasizes the transformation that Conagra has made under CEO Sean Connolly and their push towards frozen foods.

If the debt is included, then the value of the deal goes up to $10.9 billion.

According to the analysts at RBC Capital Markets, this association of Conagra, Healthy Choice owner along with Bird’s Eye-owner, Pinnacle, is set to create the second largest frozen food company of U.S, just behind Nestle. Conagra has pumped in money into their frozen foods business, having an eye towards not only to repackage but also to reformulate their products, so that they can cater to the population of younger diners.

The share prices of both the companies had stayed down during the early morning trade, which clearly suggested that there was little enthusiasm among consumers in this particular deal. It seemed as if they have not yet come to terms with what to expect out of this acquisition. Due to this reason, the stock of Pinnacle Foods was trading at low, being down 3.94 percent, whereas the shares of Conagra Brands were down 6.75 percent.

The dip in the share prices of both the stocks might reflect activity regarding arbitrage investing, which quite frequently tends to accompany deals like this, in which the company which acquires, looks to fund their purchase with stock. This could also give a reflection of some broader concerns which the food industry is facing to a large extent, like slow growth and narrow margin for the retailers.

This deal puts Pinnacle at a value of $68 per share, a lot less than what the analysts’ had estimated, which was around $75 a share.

The agreement would allow the shareholders of Pinnacle to receive $43.11 per share in cash and for each share of Pinnacle, 0.6494 shares of common stock of Conagra. The shareholders of Pinnacle are in line to own around 16% of the combined organization.