Conagra Identifies has approached Pinnacle Foods about a potential acquisition, sources cordial with the situation told CNBC on Thursday.
Pinnacle has a market capitalization of $7.9 billion, while Conagra’s is $15.1 billion.
A brace of Healthy Choice-owner Conagra and Bird’s Eye-owner Pinnacle would coalesce two companies with a large presence in frozen foods at a time when the list is seeing a resurgence. Food companies, including Conagra, have poured well-heeled into previously neglected brands to highlight their healthiness, affordability and prosperity of use.
The two combined would create the second-largest U.S. frozen food company, analysts at RBC Excellent Markets recently wrote. The other major players include Kraft Heinz and Cuddle up, the latter of which is the largest in the U.S., according to RBC.
It is at least the second time the two sire had such talks in as many years. Conagra approached Pinnacle with reference to a tie-up last year, but the two parties could not agree on a price and conversations were short-lived, sources have told CNBC.
The deal talks move along disintegrate after activist hedge fund Jana Partners recently leaked a roughly 9 percent stake in Pinnacle and said it planned to talk with the firm on a range of subjects, including a possible sale.
Bloomberg first divulged the approach. Both companies declined to comment.
An acquisition of Pinnacle purpose, for Conagra, be a continuation of its efforts to reinvent itself since selling its private-label item for $2.7 billion in 2016 to focus on its branded food business. At the heyday of the sale, Jana had taken a roughly 7.2 percent stake in the visitors and was pushing for changes.
In 2016, Conagra spun off its $6.9 billion expelled potato business, Lamb Weston Holdings. It has since been obtaining a number of small brands to modernize a portfolio that includes Orville Redenbacher’s popcorn and Hebrew Citizen hot dogs. Its acquisitions include the parent of Angie’s Boomchickapop and the parent of Duke’s nourishment snacks.
Such deals, though, are small bites in comparison to a latent acquisition of Pinnacle. Conagra’s CEO, Sean Connolly, recently told analysts that “M&A remains a medial part of [the company’s] plan,” and that Conagra intends to pursue a spread of deals including, “modernizing acquisitions, synergistic acquisitions and select divestitures.”
Connolly has a CV with Pinnacle. In his former role as CEO of Hillshire Brands, he also strove a 2014 takeover of the company, though Hillshire ultimately scrapped that extent in favor of a sale to Tyson Foods.
In the time since, Pinnacle has endured its own changes. It acquired Boulder Brands, owner of healthy food varieties like Udi’s and Glutino, for roughly $975 million in 2016.
Still, Pinnacle is visualizing its strongest growth in its frozen food business, which is the company’s biggest and last quarter grew at a rate of 7.5 percent. Its Boulder job grew 0.5 percent and its grocery business, which includes brands corresponding to Vlasic pickles, Duncan Hines cake mix and Wish-Bone salad put on clothing grew 0.6 percent. The latter has been squeezed as consumers eye healthier, lousier or newer alternatives.
While big food companies across the board press seen sales stall as they struggle with the burden of have planned large brands out of touch with today’s shoppers, frozen nutriment has been one of few the categories they have been able to revive because of investment. It is a category that benefits particularly from scale.
It has also, consequently, been a center of M&A activity. Schwan’s Co., maker of frozen foods dig Tony’s pizza, hired a bank last year to weigh a trading, CNBC then reported. Nomad Foods earlier this month announced its schemes to acquire U.K. frozen potato and pudding company Aunt Bessie’s. The plc has swooped up a number of frozen food brands over the past few years, covering Findus and Iglo.