The Hillshire Brands Co., Chicago, acquired all outstanding shares of Pinnacle Foods, Parsippany, N.J., in a cash and stock transaction. Under the terms of the agreement, each share of Pinnacle Foods common stock will be exchanged for $18 in cash and 0.50 shares of Hillshire Brands common stock. The total enterprise value of the transaction is approximately $6.6 billion, including Pinnacle Foods’ outstanding net debt, which reflects an adjusted EBITDA multiple of 9.6x. The transaction brings together two highly complementary businesses with leading, iconic brands to create a diversified food company with estimated pro forma 2014 sales of $6.6 billion. On a combined basis, the companies will have leading positions in key frozen, refrigerated and center-of-store grocery categories.

“The combination of Hillshire Brands and Pinnacle Foods brings together two highly complementary organizations with strong brands, skilled employees and lean cost structures,” says Sean Connolly, president and CEO of Hillshire Brands. “The acquisition creates a leading branded food company with enhanced scale, reach and capabilities while providing margin expansion and strong EPS accretion. The new Hillshire Brands will have a strengthened position in frozen foods, new opportunities in the center store for our brands and in refrigerated for Pinnacle Foods’ brands. We believe our increased scale combined with a more diversified portfolio will deliver strong, consistent cash flows. This will enable us to continue to invest in our brands, enhance our portfolio, pursue value accretive M&A and deliver significant long-term value to our shareholders.”

“This compelling transaction offers Pinnacle Foods shareholders an immediate premium and the opportunity to participate in the tremendous potential of the combined organization,” says Bob Gamgort, chief executive officer of Pinnacle Foods. “The complementary portfolios and strategic fit of these two companies create significant value for the shareholders of both organizations. Our common passion for developing innovative products and maintaining close ties with our customers will position the combined entity to deliver outstanding benefits for employees, customers and shareholders.”

The combined company will have a significantly expanded portfolio and enhanced operating capabilities, including:

High-quality brands. The new Hillshire Brands will enhance its strong category positioning through its robust brand portfolio of 10 No. 1 or No. 2 brands, including Jimmy Dean, Hillshire Farm, Birds Eye, Ball Park, Duncan Hines, Vlasic, Wish-Bone, State Fair, Sara Lee frozen bakery, Mrs. Butterworth's and Log Cabin, among others.

Increased scale and presence in frozen, refrigerated and center store. The combined company’s enhanced scale will significantly increase its presence with its key customer base. With leading brands and strong positions across the frozen, refrigerated and center store categories, the company will have the opportunity to further enhance its relationships with leading retailers. By extending Hillshire Brands’ reach into the center store and Pinnacle Foods’ reach into the refrigerated sector, the transaction will create a platform with new revenue opportunities.

Greater diversification. A larger portfolio across a range of categories will deliver greater revenue and input cost diversification increasing the cash flow consistency of the combined company.

Enhanced operational platform. The transaction will bring together two best-in-class operators with a shared low-cost operational approach and scalable infrastructure creating a stable platform for future expansion opportunities.