Pinnacle Foods has entered into a definitive agreement to acquire the Wish-Bone salad dressings business from Unilever PLC for $580 million, in a transaction that is expected to be immediately accretive to Pinnacle. The acquisition, which is subject to customary closing conditions, is expected to be completed in the late third quarter or early fourth quarter of 2013.
Wish-Bone is a leading salad dressing brand, holding the No. 1 share position in the Italian segment of the category and the No. 3 position overall. The portfolio being acquired includes a range of liquid and dry-mix salad dressing flavors under the Wish-Bone and Western brand names.
The brands, according to Pinnacle, have attractive margins and high free cash flow conversion and are expected to immediately enhance Pinnacle margins. Combined annual sales of the brands being acquired total approximately $190 million.
“The acquisition of Wish-Bone is a perfect fit with our successful strategy of ‘Reinvigorating Iconic Brands,'” said Pinnacle Foods CEO Bob Gamgort. “In addition to enabling significant cost synergies and tax benefits, the transaction enhances our ability to offer consumers meal solutions and recipe ideas across our broad portfolio of brands. We are excited to apply our innovation capabilities to this great brand.”
The purchase will be funded with cash on hand and new debt. Given that the acquisition will be structured as an asset purchase, Parsippany, N.J.-based Pinnacle expects to realize approximately $125 million in tax benefits on a net present value basis. Cost synergies are expected to be substantial, as the company plans to invest $40-50 million in capital to consolidate production into an existing Pinnacle facility and fully leverage the company’s supply chain. Unilever will continue to manufacture the brands to be acquired, for a period of time, under a third-party manufacturing agreement.
The company will host a conference call to discuss the transaction at 5 p.m. (ET) today.