Pinnacle Foods to buy Birds Eye Foods

by Eric Schroeder
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MOUNTAIN LAKES, N.J. — Pinnacle Foods Group L.L.C. announced Nov. 19 it has signed a definitive agreement to acquire Birds Eye Foods, Inc. in a transaction valued at $1.3 billion. A packaged food company with brands in frozen vegetables and meals along with shelf-stable products, Birds Eye Foods has more than $930 million in annual sales.

“The transaction provides meaningful opportunities to create value and strengthens our financial position,” said Bob Gamgort, chief executive officer of Mountain Lakes-based Pinnacle Foods. “This compelling combination creates a leader in both the frozen and shelf-stable business segments and enables us to better serve our customers.”

He added the Birds Eye brand alone has $640 million in net sales in the United States along with strong health and nutrition credentials.

Pinnacle Foods plans to buy Birds Eye Foods from a holding company controlled by Vestar Capital Partners, Pro-Fac Cooperative and Birds Eye management. The announcement comes after Birds Eye Foods Inc., Rochester, N.Y., said in an Oct. 8 filing with the Securities and Exchange Commission that it would try to raise as much as $350 million in an initial public offering of stock.

According to the S.E.C. filing, frozen foods make up a little more than 69% of Birds Eye Foods, Inc. sales while the company’s specialty foods group makes up nearly 30%. According to the S.E.C. filing, the Birds Eye brand holds the No. 1 position in frozen vegetables with a 26.5% share and the No. 2 spot in complete bagged meals with a 21.8% share. Birds Eye Foods also owns brands for pie fillings and toppings, chili and chili ingredients, and snacks.

Vestar Capital Partners holds a 55% interest in Birds Eye Foods, Inc. Pro-Fac, a New York-based agricultural cooperative, has a 40% stake. Birds Eye management owns the remaining 5%.

“Birds Eye Foods has been a highly successful investment for Vestar Capital Partners and its investors,” said Brian K. Ratzan, managing director of Vestar Capital Partners. “The company has grown significantly in the past few years, and today, Birds Eye Foods is an exciting business with innovative products and tremendous potential.

“Pinnacle Foods is a great place for the Birds Eye brand. It will have the resources of a larger food company platform as it expands its leadership position.”

Pinnacle Foods is owned by private equity funds controlled by The Blackstone Group. The company’s portfolio includes brands such as Duncan Hines, Vlasic, Mrs. Butterworth’s, Log Cabin, Armour, Swanson, Hungry-Man, Van de Kamp’s, Mrs. Paul’s, Aunt Jemima, Lender’s and Celeste.

Pinnacle Foods expects to fund the transaction by using a combination of new debt financing and a new equity contribution from Blackstone. Barclays Capital, Credit Suisse, BofA Merrill Lynch, HSBC and Macquarie Capital will provide debt financing comprised of senior secured credit facilities and senior unsecured bonds.

The transaction will reduce leverage multiples at Pinnacle Foods. It is expected to close no later than the first quarter of 2010. It is subject to customary regulations, including regulatory approvals.

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