Pinnacle Foods Group LLC, which has passed through the hands of three sponsors in back to back deals, could be cooking up its next buyout success story.
Owned for more than two years by The
Though it’s only a difference of one notch on S&P’s ratings scale, the upgrade could represent a significant gain when it comes to how the company is perceived by lenders, and potential buyers. According to S&P, more than one in 10 companies with a ‘B-’ rating default on their credit obligations within a year’s time. Indeed, companies rated ‘B-’ or lower with a negative outlook are even termed “weakest links” by the ratings agency.
The upgrade came on the heels of Pinnacle Foods’s acquisition of Birds Eye Foods Inc. from
“We estimate that pro forma total adjusted debt to EBITDA at the close of the transaction, excluding any EBITDA synergies, would be about 7.8x compared with Pinnacle Foods’s actual ratio of about 7.7x for the 12 months ended Sept. 30, 2009, and that potential synergies from the combination could result in reduced leverage following the close of the transaction,” S&P Analyst Christopher Johnson wrote in a research note.
The company’s leverage is expected to improve to below 7.0x EBITDA by the end of 2010, due primarily Birds Eye Foods’s higher EBITDA margins and operating synergies, Johnson added.
All told, the deal nearly doubles the size of the Pinnacle Foods platform and strengthens the prospects for yet another successful sponsor-backed exit from the company.
Pinnacle Foods has a lengthy history of LBO backing. Its first financial owner, Hicks, Muse, Tate & Furst (now called
When the Pinnacle/Aurora merger closed in March 2004, the combined company was host to several well-known brands including Duncan Hines, Aunt Jemima frozen breakfast products, Log Cabin and Mrs. Butterworth’s syrups, Van de Kamps and Mrs. Paul’s frozen seafood, Lenders bagels and Celeste pizza.
Blackstone Group entered the picture in April 2007, acquiring the Cherry Hill, N.J.-based company in a deal valued at approximately $2.2 billion, including about $900 million of assumed debt.
For the nine months ended Sept. 27, 2009, Pinnacle Foods posted net sales of $1.2 billion, up from $1.1 billion the year before. Net earnings came in at $10.8 million compared to a loss of $18.5 million the year before. Rochester, N.Y.-based Birds Eye Foods generates annual sales of about $930 million.