Milling & Baking News - July 3, 2018 - 16


Conagra acquiring Pinnacle
Foods in $10.9 billion transaction


to be low single-digit accretive to adjusted earnings per share on a percentage basis in the fiscal year ended
May 2020 and high single-digit acContinued from Page 1
12.1x adjusted EBITDA including run- cretive to adjusted e.p.s. in the fiscal
year ended May 2022. Conagra manUdi's. Conagra also owns a 44% stake rate cost synergies.
"Today's transaction provides Pin- agement added that it forecasts $215
in Ardent Mills L.L.C., the largest flour
nacle Foods shareholders with sub- million in annual costs synergies by
milling company in the United States.
In snack foods, the company will stantial and immediate value, as well the end of fiscal 2022.
"Combining Conagra and
have numerous brands, including
Pinnacle would really create
Conagra's Act II, Fiddle Faddle,
a sort of giant in the frozen
Crunch 'n Munch, Orville Redenfood aisle, with household
bacher's, Penrose, Poppycock,
name brands like Birds Eye
Slim Jim, Andy Capp's, Boomand Healthy Choice, both of
chickapop and Bigs, together with
which are experiencing strong
Pinnacle's Erin's, Hawaiian Kettle
recent growth and a bit of a
Style Potato Chips, Husman's,
resurgence, all housed under
Snyder of Berlin, El Restaurante
one roof," said Dewey Warner,
and Tim's Cascade Snacks.
research analyst at EuromoniThe combined company will
tor International. "There has
have sales of approximately $11
been a ton of attention lately
billion based on both companies'
on the renaissance happening
fiscal year results. Under the terms
in the frozen food aisle, and
of the agreement, Pinnacle Foods
understandably so. There has
shareholders will receive $43.11
been an emphasis on the inper share in cash and 0.6494 shares
fluence of fresh food and the
of Conagra Brands common stock
growth in the outer perimeter
for each share of Pinnacle Foods With the Pinnacle Foods acquisition, grain-based foods
of grocery stores, so a return
held. The implied price of $68 per will factor prominently in the product portfolio of
to growth and interest in the
Pinnacle Foods share is based on Conagra Brands, Inc.
center frozen aisles is notable.
the volume-weighted average
Most of this has to do with
price of Conagra Brands' stock for
the five days ended June 21, 2018. The as the opportunity to participate in frozen food companies finally coming
purchase price reflects an adjusted the significant upside potential of around to some self-reflection and alEBITDA multiple of 15.8x, based on the combined company," said Mark tering the products they have relied on
for so long in order to better meet conPinnacle Foods' estimated fiscal year Clouse, c.e.o. of Pinnacle Foods.
Conagra Brands expects the transaction sumers where they currently are (as
2018 results excluding synergies, and

Orphan brands no more

Aurora Foods brands account for much of the business to be acquired by Conagra
KANSAS CITY - In the mid-1990s, Ian R. Wilson established Aurora
Foods, Inc. with the objective of reinvigorating mature brands owned
by major consumer packaged goods companies but no longer viewed
as core by the parent company.
While the company he established ultimately foundered, the businesses Mr. Wilson aggregated account for the largest
number of brands within the Pinnacle Foods business
Conagra Brands, Inc. has agreed to acquire in a $10.9
billion transaction.
Over a two-year period beginning in 1996, Aurora made
a number of acquisitions, including Mrs. Butterworth's from
Unilever, Log Cabin from Kraft (then a unit of Philip Morris) and Duncan
Hines from Procter & Gamble Co. Aurora Foods went public in 1998.
In a late 1998 interview with Milling & Baking News, Mr. Wilson, a
longtime grain-based foods executive, said his approach toward building
Aurora was focused and simple. The company was looking for brands that
had considerable brand equity but were "under-managed and undermarketed," he said. He referred to his acquisitions as "orphan brands."
"We never think that we're smarter than anybody else," he
continued. "We don't do start-ups. We don't do turnarounds. We
only take brands that have become non-core and work with them.

16 / July 3, 2018

Milling & Baking News

We're very disciplined at what we do. It's as simple as that."
Aurora's success proved short-lived, and Aurora filed for bankruptcy in 2002. Mr. Wilson was sentenced to two years and nine
months in prison following a fraud conviction related to the underreporting of millions of dollars in marketing expenses to inflate
reported profits.
The following year, Pinnacle Foods acquired Aurora
for $935 million. Pinnacle had been established a year
earlier by Metropoulos & Co. together with other partners after acquiring Vlasic Foods International for $370
In 2007, Pinnacle was acquired by Blackstone Group for $2.2 billion. Two years later, Pinnacle acquired Birds Eye Foods, Inc. for $1.3
billion. In 2013, Pinnacle raised $480 million in an initial public offering. The company acquired Boulder Brands, Inc. in 2015 for just
under $1 billion.
The 2013 i.p.o. was priced at $20 per share, and Pinnacle's share
price rose steadily in the five years that followed, closing at $65.23
on June 28, up from $58.49 at the start of 2018.
Whether Conagra will retain all of the Aurora brands remains to
be seen. MBN /

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