Pinnacle Foods Inc., the owner of old-line brands like Duncan Hines, agreed to buy Boulder Brands Inc. for $682 million in a push to woo younger shoppers with gluten-free and organic foods and to cut costs by combining manufacturing networks.
Pinnacle said Tuesday it would pay $11 a share for Boulder Brands, valuing the maker of Udi's gluten-free pizzas and Evol natural frozen dinners at a 9.2% premium over Monday's closing price. The deal, which includes about $265 million of debt, reflects an effort by Pinnacle to diversify its lineup at a time when many U.S. consumers are buying foods they perceive as healthier and less-processed.
Pinnacle, whose brands include Vlasic pickles and Birds Eye frozen vegetables, has a track record of acquiring products in food segments plagued by sales declines and reviving them through new marketing strategies and product launches. Its deal for Colorado-based Boulder Brands augments a recent move into health-focused categories, including its purchase a year ago of Gardein Protein International Inc., a maker of vegetarian packaged foods.
"In an environment where growth is challenged, it's terrific to tap into areas that have inherent growth in them," Pinnacle Chief Executive Bob Gamgort said on a conference call with analysts and investors on Tuesday.
Mr. Gamgort said U.S. sales of gluten-free food, for instance, have more than doubled to $11 billion in the past couple of years. "This is not a fad. This is a sustainable trend that is driven by a real consumer need," he said.
Pinnacle's purchase of Gardein, a maker of frozen veggie burgers and other products, "allowed [Pinnacle] to try a different space" and "has given us the confidence to make this acquisition," Mr. Gamgort said.
Pinnacle shares slumped 2.7% to $42.03 in recent trading. Boulder Brands shares jumped 8.5% to $10.93, just shy of the planned purchase price.
Some analysts said the deal reduces the likelihood that Pinnacle would team up with a larger rival. Analysts have speculated for months that Pinnacle might merge with ConAgra Foods Inc. or acquire the frozen-food business of Kraft Heinz Co.
Mr. Gamgort said Pinnacle maintains an appetite for other deals, including one in which it could acquire a larger brand using a merger structure called a Reverse Morris Trust.
"Since the IPO, we've had an ambition for a big RMT," he said. "That ambition still remains?I don't think this marks a tremendous shift, but what I do think is it continues to signal that we're open-minded and looking at transactions that are slightly more growth-oriented without paying a crazy premium for them."
The deal for Boulder Brands is the latest in a string of food acquisitions as makers of conventional processed foods seek to bulk up in faster-growing categories. Last month, Snyder's-Lance Inc. agreed to purchase fellow snack company Diamond Foods Inc. for about $1.91 billion to bolster its natural offerings. Last year, General Mills Inc. paid $820 million?a 37% premium?for natural and organic snack maker Annie's Inc.
Boulder Brands, which also makes Glutino gluten-free snacks and Smart Balance buttery spreads and cooking oils, reported sales last year rose 12% to $516.6 million. But as growth slowed, and costs remained high, the company swung to a loss of $127.1 million. Those results pushed it to seek a buyer.
Boulder Brands founder and Chief Executive Steve Hughes stepped down in June, and in August, the board announced it was exploring strategic alternatives.
Pinnacle last year reported $2.6 billion in sales and a $248.4 million profit.
Mr. Gamgort said the combined company can save money by consolidating manufacturing and distribution, particularly among frozen foods where the companies overlap. It also thinks that more marketing and innovation can help Boulder Brands' struggling Smart Balance line.
Pinnacle said Tuesday that it will provide 2016 guidance, including the acquisition, when it reports fourth-quarter earnings in February. The company expects to complete the transaction in the first quarter.
Lisa Beilfuss contributed to this article
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