Pinnacle Foods Group LLC, owned by private equity funds controlled by The Blackstone Group (BX), said Thursday that it signed a definitive agreement to acquire frozen-vegetable and meals company Birds Eye Foods, Inc. from a holding company controlled by Vestar Capital Partners, Pro-Fac Cooperative, and Birds Eye management, for $1.3 billion.
The announcement probably indicates a recovery in the economy, where acquisitions are coming back, after a recession-imposed interval. The deal was reported earlier by the Wall Street Journal.
Rochester, New York-based Birds Eye is a recognized packaged food company having over $930 million of total sales as of June 27, 2009. It has frozen vegetables and meals brands such as Birds Eye, Birds Eye Steamfresh and Birds Eye Voila! as well as shelf-stable brands including Comstock and Wilderness pie fillings and toppings.
Commenting on the deal, Pinnacle Foods' CEO Bob Gamgort, said, ''The Birds Eye brand has $640 million in net sales in the U.S. and strong health and nutrition credentials, along with proven extendibility into new segments and occasions. The transaction provides meaningful opportunities to create value and strengthens our financial position. This compelling combination creates a leader in both the frozen and shelf stable business segments and enables us to better serve our consumers andcustomers."
Blackstone, a provider of alternative asset management and financial advisory services, acquired New Jersey-based Pinnacle in 2007 for $2.2 billion. Recently, Blackstone agreed to buy the entertainment businesses of Belgian brewer Anheuser-Busch InBev NV (BUD, AHBIF.PK) for up to US$2.7 billion.
Pinnacle expects to fund the transaction using a combination of new debt financing at thecompany and new equity contribution from Blackstone. The transaction will reduce leverage multiples at Pinnacle.
Debt financing in support of the acquisition will be comprised of senior secured credit facilitiesand senior unsecured bonds. The financing will be provided by Barclays Capital, Credit Suisse,BofA Merrill Lynch, HSBC, and Macquarie Capital.
The closing of the transaction is expected to occur by the first quarter of 2010.
Pinnacle Foods is being advised by Blackstone Advisory Partners LP, Barclays Capital, BofAMerrill Lynch, and Credit Suisse.
Birds Eye Foods is being advised by Centerview Partners. JP Morgan also acted as an advisor to Birds Eye. Simpson Thacher & Bartlett LLP is acting as legal counsel to Pinnacle Foods. Kirkland & Ellis LLP is serving as legal counsel to Birds Eye Foods.
On October 9, Birds Eye Foods had said that it plans to raise as much as $350 million in an initial public offering and intends to use the proceeds to repay debt under its credit facility. The company did not disclose the number of shares it intends to sell or an estimated price. The company said then that it had debt totaling $704 million as of June 27.
Pinnacle Foods said today that as a result of the deal announcement, the planned public offering of Birds Eye stock would be withdrawn.
BX closed Thursday's regular trade at $15.28, down $0.27 or 1.74%, on 4.11 million shares.
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