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Pinnacle Foods Inc., Parsippany, NJ, announced on June 30 that it has exercised its right to terminate its merger agreement with The Hillshire Brands Co., Chicago, announced on May 12.
Pursuant to the terms of the merger agreement, Pinnacle is entitled to receive a cash payment from Hillshire Brands of $163 million as a result of this termination. Pinnacle indicated that one-time fees and expenses associated with the merger agreement, including external advisers and employee incentives, are expected to total approximately $25 million.
Given the company’s sizable net operating loss carry-forwards (NOLs), Pinnacle expects to pay minimal cash taxes on the payment from Hillshire. It plans to use the net cash proceeds to reduce debt and, as a result, expects net interest expense for the year to fall slightly below the $100 million previously disclosed. The interest savings are expected to be reinvested in the business in 2014.
On a pro forma adjusted basis, which excludes the merger-related payment, fees and expenses and other items affecting comparability, Pinnacle reaffirmed its guidance for diluted earnings per share (EPS) for 2014 in the range of $1.70 to $1.75.
Commenting on the announcement, Pinnacle Foods CEO Bob Gamgort states, “We're excited to continue delivering long-term value for our shareholders through our strategy of reinvigorating iconic brands. We continue to manage well through the difficult industry and category environment that we have discussed previously. The termination payment provides us with increased optionality in executing our strategy.”
Pinnacle Foods is known for a variety of branded food products, including Duncan Hines baking mixes and frostings, Duncan Hines Comstock and Wilderness pie and pastry fruit fillings, Aunt Jemima frozen breakfasts, Lender’s frozen and refrigerated bagels and Celeste frozen pizza. Its Specialty Foods Division manages Tim’s Cascade Snacks Hawaiian kettle-style potato chips, Erin’s popcorn and Snyder of Berlin and Husman’s snacks.
Source: Pinnacle Foods Inc., PR Newswire