Pinnacle Foods Inc.’s moment as a pricey takeover target is slipping away.

Pinnacle, majority-owned by Blackstone Group LP, agreed last month to sell itself to Hillshire Brands Co. in a transaction valued at $6.6 billion, one of the most expensive major food deals ever struck, according to data compiled by Bloomberg. Those plans were disrupted when Hillshire itself received takeover bids that may be too good to pass up, spurring bets that the Pinnacle purchase is dead. If Hillshire calls off the agreement, it will have to pay Pinnacle $163 million and Blackstone will be left holding its 51 percent stake.

While there were a record $71 billion of food deals announced in the six months through May, most buyers are looking to diversify into products that target health-conscious, on-the- go consumers or expand their geographic reach, according to Ken Shea, an analyst for Bloomberg Industries. Pinnacle, whose brands include Vlasic pickles, Hungry-Man frozen dinners and Duncan Hines cake mix, wouldn’t be the answer, he said. With few immediate suitors, Pinnacle, which bought Wish-Bone salad dressing last year, will go back to making more purchases of its own, Barclays Plc said.

“I don’t see a long line of bidders for Pinnacle,” Shea said in a phone interview from Skillman, New Jersey. “These are mature brands. The food industry is consolidating, but most of the deals seem to be centered around strategies that involve boosting scale or diversifying someone’s product mix away from the center of the grocery store” towards the faster-growing fresh or frozen items found on a store’s perimeter.

Blackstone Buyout

Representatives for Parsippany, New Jersey-based Pinnacle, whose brands range from Birds Eye frozen vegetables to Mrs. Butterworth’s maple syrup, and New York-based Blackstone didn’t return phone calls seeking comment.

Blackstone acquired the foodmaker for $2.2 billion seven years ago, then took it public last year. The private-equity firm’s stake was valued at $1.9 billion yesterday, data compiled by Bloomberg show.

It was about to monetize some of that investment through Hillshire’s cash-and-stock offer of $4.2 billion for Pinnacle.

Including net debt, the deal valued Pinnacle at about 17 times its trailing 12-month earnings before interest, taxes, depreciation and amortization. That would have made it the most expensive food takeover since the financial crisis, according to data compiled by Bloomberg based on transactions larger than $5 billion.

Hunting Hillshire

Hillshire’s shareholders weren’t pleased with the deal, and the sausage maker’s shares dropped as much as 7.4 percent after the deal was made public May 12.

Just two weeks later, those plans began to unravel as Hillshire received bids from both Pilgrim’s Pride Corp. and Tyson Foods Inc., whose offers are contingent on it not buying Pinnacle.

Analysts including Farha Aslam of Stephens Inc. have concluded that the Pinnacle transaction is probably off the table now.

Today, Hillshire said it authorized talks with its two suitors after Pilgrim’s Pride increased its bid. The company said it’s not making any recommendation regarding either of the competing proposals, and that it wasn’t withdrawing or altering its recommendation regarding the planned purchase of Pinnacle.

‘Whipsaw’ Situation

Pinnacle shares have lost almost 8 percent since May 12. They closed at $31.75 yesterday, about 29 percent below the value of Hillshire’s offer. Today, Pinnacle rose 0.1 percent to $31.78 at 10:08 a.m. New York time, while Hillshire rallied 9 percent to $58.36.

“It definitely is a whipsaw, but not one that Pinnacle can’t recover from,” Aslam said in a phone interview from New York. “Fortunately, the whole thing was a two- to three-week process,” so it didn’t disrupt Pinnacle’s business much.

Other suitors are unlikely to emerge for Pinnacle, at least right now, according to Shea of Bloomberg Industries, which said industry buyers have been more attracted to pure-play companies.

Also, Pinnacle gets 26 percent of its revenue from Wal-Mart Stores Inc., which is an outlet that most food suppliers already have plenty of exposure to, he said. And almost all of Pinnacle’s sales are generated in the U.S., so it wouldn’t expand a domestic company’s geographic footprint, data compiled by Bloomberg show.

Maple Syrup

There’s also a greater desire for products that are found along the outer edges of grocery stores, such as yogurt, deli meats, salads and convenient frozen options, versus the canned and boxed items sold in the center of stores, said Shea. While Pinnacle does make frozen foods, many of its product offerings are condiments, maple syrup and baking products.

If the deal with Hillshire is shelved, Pinnacle will likely go back to making purchases and consolidating the packaged-foods industry, Andrew Lazar, a New York-based analyst at Barclays, wrote in a report last week. Pinnacle has acquired brands such as Birds Eye in 2009 and Unilever’s Wish-Bone last year.

One way Blackstone can dilute its stake is for Pinnacle to make a sizeable acquisition using a Reverse Morris Trust, similar to what J.M. Smucker Co. and Folgers did in 2008, said Aslam of Stephens. In a Reverse Morris Trust, the seller spins off a unit, which is then merged with the acquiring company by swapping stock.

Blackstone has already recouped about $557 million of its $674 million Pinnacle investment through share sales and dividends, according to regulatory filings.

Deal Fuel

The breakup fee Pinnacle is owed gives it more firepower to pursue its own acquisitions and grow its brands, according to Sandy Villere III, a New Orleans-based fund manager at Villere & Co., which oversees $3.4 billion and owns Pinnacle stock.

“There are no buyers that I see coming along for Pinnacle now,” Villere said in a phone interview. “It’s back to business as usual. But I really like the Pinnacle business and think they’re going to do well over time. Now they’ve got an extra $163 million to execute.”

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