Conagra Brands accelerated its push into frozen foods on Wednesday, announcing it would acquire Pinnacle Foods in an $8.1 billion deal that will add such brands as Birds Eye and Hungry Man to its lineup.
As The Wall Street Journal reports, the frozen-foods business has been “a rare bright spot” for the packaged food industry, which has been struggling as customers shift to natural and prepared foods. Between 2016 and 2017, packaged foods’ annual growth slowed to 1.2%.
The combination of Conagra and Pinnacle would create the second-largest U.S. frozen food company behind Nestlé. Sales of Conagra’s frozen and refrigerated brands, which include Healthy Choice, rose 5.2% in the latest quarter, while Pinnacle’s were up 7.5%.
The merger values Pinnacle at $68 a share, with Pinnacle shareholders receiving $43.11 in cash and 0.6494 Conagra shares for each of their shares.
“After three years of transformative work to create a pure-play, branded food company, we are well-positioned to accelerate the next wave of change,” Conagra CEO Sean Connolly said in a news release.
“The addition of Pinnacle Foods’ leading brands in the attractive frozen foods and snacks categories will create a tremendous opportunity for us to further leverage our proven innovation approach, brand-building capabilities, and deep customer relationships,” he added.
The changes at Conagra since Connolly became CEO in 2015 have been aimed at “modernizing a portfolio of branded foods that includes names like Orville Redenbacher’s popcorn and Hebrew National hot dogs,” CNBC said. “It has put money toward its frozen foods business, as millennials have rediscovered the cost and health benefits of eating frozen.”
The food industry as a whole has been consolidating amid the growing clout of grocery-store giants such as Walmart and Kroger. “Everybody is on the lookout for growth right now … and everybody knows you can’t cut your way to prosperity,” Connolly told the WSJ.
Pinnacle acquired Boulder Brands, owner of gluten-free foods and snacks like Udi’s and Glutino, for roughly $975 million in 2016. “It was likely pushed to do a more transformative deal by activist investors at Jana Partners,” the Journal reported.