Blackstone’s Pinnacle Foods to Acquire Birds Eye in $1.3 Billion Deal

Blackstone’s Pinnacle Foods to Acquire Birds Eye in $1.3 Billion Deal

Birds Eye Foods, the largest frozen-vegetable company in the U.S., is expected to be acquired for more than $1.3 billion by Pinnacle Brands Corp., according to people familiar with the matter.

The all-cash deal is likely to be announced as soon as Thursday, said these people. Pinnacle, owned by New York's Blackstone Group, is one of the country's largest packaged-food companies with well-known consumer brands such as Duncan Hines baking mixes and Swanson frozen dinners.

The Rochester, New York-based Birds Eye, known for its branded frozen vegetables and frozen meals, is majority owned by the private-equity firm Vestar Capital Partners. It is also 40% owned by Pro-Fac, a 48-year-old New York agricultural cooperative. Birds Eye carries about $700 million in long-term debt.

Acquired by Vestar in 2002, Birds Eye is sold in most of the country's largest grocery stores, including Wal-Mart, Kroger and Safeway. Birds Eye, which has about 1700 full-time employees, has a dominant niche in warehouses and distribution centers across the Midwest in states including Michigan, Minnesota and Wisconsin.

Representatives for Blackstone and Birds Eye did not reply to phone calls and emails seeking comment.

The New Jersey-based Pinnacle was acquired by Blackstone in 2007 for $2.2 billion. It houses names common with consumers such as Vlasic pickles, Mrs. Butterworth pancake syrup and Open Pit barbeque sauce.

For the first nine months of the year, Pinnacle frozen foods with about 25 percent of the frozen-vegetable market in the United States. It has

reported net earnings of $10.8 million on sales of $1.23 billion.

The all-cash deal is yet another sign that private-equity funds have become more willing to make acquisitions after a tumultuous two-year period. Many private-equity funds are also eager to sell off businesses, having delivered few returns during the freeze in the credit and merger markets.

The purchase may also be another signal that lenders are willing to lend at higher leverage levels. In early November IMS Health agreed to a $4 billion private-equity leveraged buyout at five times earnings, a higher level than had been considered reasonable this year.