By Saabira Chaudhuri
Pinnacle Foods Inc. (PF) has agreed to buy Unilever PLC's (UL,
ULVR.LN) Wish-Bone salad-dressings business for $580 million, a
deal the Parsippany, N.J.-based food company said will lead to
substantial cost synergies.
The portfolio of Wish-Bone dressings being acquired includes a
range of liquid and dry-mix salad-dressing flavors under the
Wish-Bone and Western brand names. The brands have combined annual
sales of roughly $190 million.
"In addition to enabling significant cost synergies and tax
benefits, the transaction enhances our ability to offer consumers
meal solutions and recipe ideas across our broad portfolio of
brands," Pinnacle Foods Chief Executive Officer Bob Gamgort
said.
The deal is expected to close in the third or fourth quarter and
immediately bolster Pinnacle's results.
The purchase price will be funded with cash on hand and new
debt. Pinnacle expects to realize about $125 million in tax
benefits. It plans to invest $40 million to $50 million to
consolidate production into an existing Pinnacle facility and
leverage the company's supply chain.
Unilever noted the deal doesn't include its facility in
Independence, Mo., at which Wish-Bone and Western brands are
currently produced. The factory will continue to manufacture for
Pinnacle Foods under a third-party agreement.
Pinnacle said the full run rate of earnings before interest,
taxes, depreciation and amortization of the acquired business is
expected to reach $65 million, once full synergies are
realized.
The company said its per-share earnings will be slightly helped
in 2013 to meaningfully helped starting in 2014.
Reuters in June had reported that the Wish-Bone business had
drawn interest from B&G Foods Inc. (BGS) as well as
Pinnacle.
Prior to that, in May, Mergermarket had reported that Unilever
had hired Goldman Sachs Group Inc. (GS) to sell the salad-dressing
business. At the time, the publication cited Pinnacle as a possible
buyer, noting that it is focused on the center of the grocery
store, where Wish Bone is stocked.
In May, Pinnacle reported its fiscal first-quarter profit more
than doubled as input costs declined.
Shares of Pinnacle closed Friday at $25.46, while American
depositary shares of Unilever closed at $40.30. Both companies'
stocks were inactive in recent premarket trading.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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