Pinnacle Foods Inc., the maker of Hungry Man dinners that’s majority-owned by Blackstone Group LP, agreed to buy Unilever’s Wish-Bone unit for $580 million, adding the U.S. market leader for Italian salad dressings.
The transaction is expected to immediately add to earnings and brings in brands with annual sales of about $190 million, Parsippany, New Jersey-based Pinnacle said today in a statement. Wish-Bone also includes the Western dressings brand.
Unilever, the maker of hundreds of products from Dove soap to Knorr soup, has been pruning its food business to focus on faster-growing health and beauty products. The company sold its Skippy peanut butter brand this year, having disposed of its P.F. Chang’s and Bertolli frozen meals businesses in 2012.
The Wish-Bone sale “fits within Unilever’s mantra lately of repositioning their portfolio to stronger long-term growth prospect brands,” Erin Lash, an analyst at Chicago-based Morningstar Inc., said in an interview. “With some of these brands, they weren’t able to leverage the strength and others would be more apt to do so.”
Lash rates Unilever shares as slightly undervalued and doesn’t rate Pinnacle. Eight analysts recommend buying Pinnacle and two recommend holding the stock, according to data compiled by Bloomberg.
Wish-Bone is “a perfect fit” with Pinnacle’s strategy of reinvigorating iconic brands, Chief Executive Officer Bob Gamgort said in the statement.
The potential of Wish-Bone’s brands “can now be more fully realized with Pinnacle Foods,” Unilever North America President Kees Kruythoff said in a separate statement.
Unilever was little changed to 29.74 euros at the close in Amsterdam. The shares have advanced 3.1 percent this year. Pinnacle, in which Blackstone holds a 68 percent stake, rose 2.9 percent to $26.19 at the close in New York.
The transaction will be funded from cash and new debt, Pinnacle said. Pinnacle obtained a $550 million term loan to support the purchase, according to a regulatory filing today. Bank of America Corp. is providing financing that will be issued by subsidiary Pinnacle Foods Finance LLC, the company said.
The company may realize cost benefits exceeding 6 percent of sales by late 2015 or 2016, executives said today during a conference call. The acquired business should add $65 million to full-year earnings before interest, tax, depreciation and amortization once those have been fully realized, the company also said.
The sale doesn’t include Unilever’s plant in Independence, Missouri, the Anglo-Dutch company said. The factory will continue to manufacture for Pinnacle under a third-party agreement, Unilever said.
Pinnacle said Bank of America is its financial adviser on the transaction.