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Will Conagra Stock Gain from Acquiring Pinnacle Foods?


Jun. 27 2018, Updated 8:34 a.m. ET

Conagra and Pinnacle Foods

Conagra Brands (CAG) announced its acquisition of Pinnacle Foods (PF) for $10.9 billion, which includes Pinnacle Foods’ outstanding net debt. Earlier, CNBC reported that Conagra would likely acquire Pinnacle. The combination of the two companies creates a substantially sized US frozen food company.

The deal seems to be strategic for Conagra Brands. Lately, the frozen food category has been witnessing accelerating demand. For instance, Conagra Brands’ Refrigerated & Frozen segment has grown at a healthy rate in the past three quarters. The segment will likely sustain the momentum in upcoming quarters.

During the last reported quarter, Conagra Brands’ Refrigerated & Frozen segment’s revenues increased 3%. Although the growth rate seems low, 3% growth looks healthy considering the decline in other food categories.

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Conagra Brands is restructuring its portfolio by acquiring fast-growing brands. The company’s acquisition of BIGS, Duke’s, and Angie’s Boom Chicka Pop are expected to drive its Grocery & Snacks segment. The addition of Pinnacle Foods’ frozen portfolio is expected to strengthen Conagra Brands’ Refrigerated & Frozen segment.

Stock performance

Conagra Brands stock has risen 1.5% YTD (year-to-date) as of June 26. Conagra Brands is one of the few stocks in the packaged food sector that’s trading in the green including Kellogg (K) and McCormick (MKC). Hershey (HSY), General Mills (GIS), Kraft Heinz (KHC), and Campbell Soup shares have marked a double-digit decline on a YTD basis.

Note: This article has been updated since its original publication to reflect the merger’s announcement.


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