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Pinnacle to Buy Boulder for $710 Million to Add Natural Food

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Pinnacle to Buy Boulder for $710 Million to Add Natural Food

  • Takeover gives Pinnacle Glutino, Earth Balance, Evol brands
  • About half of Pinnacle's sales will be from wellness products

Pinnacle Foods Inc., the maker of Birds Eye frozen vegetables and Vlasic pickles, agreed to buy Boulder Brands Inc. for about $710 million to add gluten-free baked goods and dairy-free spreads.

Boulder’s investors will receive $11 a share, Parsippany, New Jersey-based Pinnacle said Tuesday in a statement. The price represents a 9.2 percent premium to Boulder’s closing price on Monday. Including about $265 million of net debt, the deal is valued at about $975 million.

The deal bolsters Pinnacle’s lineup of mostly conventional grocery offerings with a stable of brands that appeal to consumers seeking natural and organic goods. Boulder, based in the Colorado city of the same name, makes Evol natural frozen meals, Udi’s and Glutino gluten-free bakery items, and Earth Balance and Smart Balance spreads. Pinnacle said the deal will add to earnings beginning in 2016.

"It gets them into health and wellness, which is growing a lot faster than typical center-of-the-store brands," said Michael Halen, an analyst at Bloomberg Intelligence. "They’re getting stronger where the customer is going."

Activist Pressure

Boulder’s sale came after activist Glenn Welling’s Engaged Capital amassed about 9.5 percent of the company and urged it to explore changes, including a possible sale of the whole company or some businesses. Engaged often agitates for the sale of its targeted companies. Recent transactions included Silicon Image Inc., Oplink Communications Inc., Volcano Corp. and Procera Networks Inc.

Representatives of Engaged Capital declined to comment on the Boulder sale on Tuesday.

After Pinnacle’s deal for Boulder is completed in the first quarter of next year, about 50 percent of Pinnacle’s sales will come from health and wellness products, Chief Executive Officer Bob Gamgort said on a conference call. Acquiring Boulder will give the company access to more organic and natural retailers and increase its appeal to millennial customers, he said.

With Pinnacle’s announcement Tuesday, the value of pending, completed and proposed deals in the U.S. packaged food industry this year passed $79 billion, the most in at least 12 years, according to data compiled by Bloomberg. The bulk of that total comes from the merger of Kraft Foods and Heinz in a $55 billion deal orchestrated by Warren Buffett’s Berkshire Hathaway Inc. and 3G Capital.

Boulder shares rose 8.4 percent to $10.92 at the close in New York. The stock has declined 1.3 percent this year. Pinnacle fell 1.5 percent to $42.57. The shares have gained 21 percent this year.

— With assistance by Beth Jinks

(Updates with closing share price in ninth paragraph.)