Conagra recently announced it had signed an agreement to acquire Pinnacle Foods in a $10.9bn deal.
The transaction includes Pinnacle’s net debt of $2.7bn and is expected to be completed by year-end.
According to Dave Marberger, Conagra’s CFO, Pinnacle’s shareholders will eventually own 16% of the combined company.
Sweet treats and snacks are ‘attractive domains’
According to Connolly, the acquisition will combine two great portfolios to create an $11bn company with iconic brands in frozen, snacking, refrigerated and grocery categories.
“The merged company will be a leader in frozen foods with $4.9bn in sales and will have enhanced scale overall to better partner with customers,” said Connolly, noting it will also enhance Conagra’s portfolio of brands across other “attractive domains,” including snacks and sweet treats.
“We see a clear opportunity because we have a $2bn snack business at retail,” he added.
“It plays in four of the fastest-growing snack sub-segments… now we are going to be able to add some snack assets to that mix with some of the Pinnacle brands.”
On the baking front, Pinnacle rolled out some “fantastic innovations” from Duncan Hines, a range of baking mixes, brownies and frostings, last year.
“It’s really demonstrating that Duncan Hines operates well as a sweet treat, a convenient sweet treat,” said Connolly.
“We think there is real innovation opportunity still ahead there, and it fits squarely with what we do in sweet treats where we have great brands like Swiss Miss and Snack Packs.”
Q4 and full-year 2018 results
Conagra also delivered its latest earnings results.
Its net sales for Q4 were up 5.6% compared to a year ago. Organic net sales grew 2% driven by solid growth in both of our domestic retail segments.
For full- fiscal year 2018, net sales were up 1.4% and organic net sales decreased 0.2%, said the company.
If Conagra completes its acquisition of Pinnacle by year-end, “we expect the transaction to be low single-digit accretive to adjusted EPS on a percentage basis in fiscal year 2020, the first full fiscal year following close and to be high single-digit accretive to adjusted EPS on a percentage basis by fiscal year 2022,” said Marberger.
Conagra’s organic net sales in 2018 are expected to grow by 1% to 2% without the impact from the pending merger with Pinnacle, he added.