Pinnacle Foods To Buy Unilever's Wish-Bone Salad Dressings Unit For $580 Mln

(RTTNews) - Pinnacle Foods Inc. (PF) on Monday announced that it has entered into a definitive agreement to acquire the Wish-Bone salad dressings business from Anglo-Dutch consumer goods giant Unilever Plc. (UL, ULVR.L, UN) for $580 million.

The company expects the transaction, which is subject to customary closing conditions, to be completed in late third quarter or early fourth quarter, and to be immediately accretive.

The company also projects that earnings per share accretion would grow from a slight impact in 2013 to meaningful levels, beginning in 2014.

Pinnacle said it would provide updated earnings per share guidance for fiscal 2013, including the expected impact of the Wish-Bone acquisition, along with its second-quarter earnings announcement on August 14.

Wish-Bone's portfolio being acquired includes a broad range of liquid and dry-mix salad dressing flavors under the Wish-Bone and Western brand names. Combined annual sales of these brands total approximately $190 million. Pinnacle expects that the attractive margins and high free cash flow conversion of these brands would immediately enhance its margins.

Pinnacle said it will fund the purchase price of the transaction with cash on hand and new debt. The company expects to realize about $125 million in tax benefits, as the acquisition will be structured as an asset purchase.

Cost synergies are expected to be substantial, as the company plans to invest $40 million to $50 million in capital to consolidate production into an existing Pinnacle facility and fully leverage its supply chain.

Under a third-party manufacturing agreement, Unilever will continue to manufacture the acquired brands for a period of time. Pinnacle noted that synergy realization will be phased over time, beginning in 2014 and ramping up through 2015, as manufacturing is transitioned to Pinnacle.

The company expects the full run-rate EBITDA of the acquired business to reach $65 million, once full synergies are realized.

Pinnacle Foods Chief Executive Officer Bob Gamgort stated, "The acquisition of Wish-Bone is a perfect fit with our successful strategy of 'Reinvigorating Iconic Brands.' 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."

In late July, Unilever sold Unipro, a supplier of oils and fats to the Industrial and Bakery markets in Turkey and the surrounding region, to AAK, a producer of high value-added vegetable oils and fats. Meanwhile, Unilever increased its stake in Indian subsidiary Hindustan Unilever or HUL to 67 percent recently.

Pinnacle shares closed Friday's trading at $25.46, up $0.09 or 0.35 percent.

In London, Unilever shares are currently trading 7 pence or 0.27 percent lower at 2,589 pence.