Pinnacle Foods Inc. announced on November 24 that it has entered into a definitive agreement for the acquisition of Boulder Brands in a transaction aimed at enhancing the buyer’s presence in health and wellness categories. The proposed purchase would also enhance Parsippany, New Jersey-headquartered Pinnacle’s profile in the natural and organic retail channel and provide it with a new growth platform in the refrigerated foods sector.
Under terms of the deal, Pinnacle Foods intends to launch a tender offer to acquire all of the outstanding stock of Boulder Brands for $11 per share in a transaction valued at about $975 million, including approximately $265 million of net debt. The agreement is subject to customary closing conditions and is expected to be completed in the first quarter of 2016.
Boulder Brands, headquartered in Boulder, Colorado, manufactures a portfolio of health and wellness brands, including Udi’s and Glutino gluten-free products, EVOL natural frozen meal offerings, and Smart Balance and Earth Balance refrigerated and shelf-stable dairy-free spreads. Its portfolio is sold in conventional grocer stores as well as through natural and organic food channels in the United States, with a consumer base that skews younger than that of Pinnacle’s current product line average. Annual net sales of Boulder Brands totaled over $500 million in 2014.
Commenting on the announcement, Pinnacle Foods CEO Bob Gamgort stated: “The acquisition of Boulder Brands further expands our health and wellness portfolio, currently anchored by the Birds Eye and Gardein brands. In addition to being a synergy-rich, accretive transaction with on-trend brands, the acquisition provides us with an important health and wellness talent pool in Boulder, Colorado. In this regard, we plan to retain Boulder’s existing headquarters location.”
Boulder Foods has been looking for a buyer since August, following the announcement of a second quarter loss of $3.3 million and no earnings on net sales of $117.7 million (down 10.4% from the equivalent period in 2014). At that point the stock had declined 34% in value over the past year. During the past 52 weeks its price has ranged from a high of $11.85 on February 24 to a low of $6.28 per share on July 8.
On the morning of November 24, after Pinnacle’s acquisition announcement, Boulder Brands stock had risen by 8.54% to $10.95 on the NASDAQ Exchange amidst trading. As this story was being written, 25.49 million shares had changed hands, compared the stock’s average daily turnover of 546,265 shares.
Dean Hollis, chairman of Boulder Brands, commented: “After a thorough review of strategic alternatives to enhance shareholder value, we are pleased to provide our shareholders with immediate and substantial cash value. In addition to shareholder value, this combination provides significant benefits for all stakeholders.”
Pinnacle’s planned purchase will be funded with cash on hand and new debt. The buyer anticipates that, over the next two years, it will increase Boulder Brands’ 2015 consensus Adjusted EBITDA of $62 million by approximately 50%, through a combination of synergies and previously identified cost savings, partially offset by the impact of portfolio optimization that Pinnacle plans to undertake.
