TheChek News Flow

ConAgra Brands [NYSE:CAG] recently approached Pinnacle Foods [NYSE:PF] to discuss a possible takeover, according to Reuters, though PF’s response to the interest is unclear. The packaged food space is certainly ripe for consolidation as a consumer shift to healthier options has hurt growth. Given new PF CEO Mark Clouse’s appetite for some type of transformative deal, and the fact CAG CEO Sean Connolly previously pursued PF while leading Hillshire Brands, the Flash wondered earlier this year if CAG could make a move for PF. Connolly has made a number of divestitures to radically transform CAG and now with leverage at about 1.5x, CAG could look for a big deal. Both CAG and PF may eye Reckitt Benckiser’s [LON:RB] food business, which based on analytics from this news service, could fetch an equity valuation of GBP 1.49bn (USD 1.9bn). In February, PF said it could boost its leverage up to about 5.5x to do a deal, giving it about USD 2bn in firepower. PF’s previous agreement to sell to Hillshire, which fell through when Hillshire itself was bought, shows the company is open to a sale. And CAG is certainly looking for a deal. If the company is unable to land PF, it may move on to another target. And with a number of dealmakers on its board, including the addition of a high-profile seller last December, perhaps CAG could look for a suitor of its own. Fellow Chicago, Illinois-based food company Kraft Heinz [NASDAQ:KHC] has shown its hungry for a large deal after its failed bid for Unilever [LON:ULVR] earlier this year.

Three strikes and PPG Industries [NYSE.PPG] is out. After Akzo Nobel [AMS:AKZA] rejected a third bid of EUR 96.75 (including dividend payment), PPG has dropped its hostile pursuit of the Dutch coatings company. PPG noted that Akzo’s “boards have consistently refused to engage and did not respond to our call or letter.” PPG had run out of time after the Dutch Authority for the Financial Markets (AFM) made a decision not to extend the deadline by which PPG had to submit a formal tender offer past today. The Amsterdam Enterprise Court’s rejection of AKZA activist Elliott Management’s request to force an EGM to vote on the ouster of AKZA Chairman Antony Burgmans left the company with very few options to continue its hostile approach. AKZA acknowledged PPG’s withdrawal, restating that the planned split of the company into two divisions, Paints and Coatings and Specialty Chemicals, “will lead to a step change in growth and long-term value creation for our shareholders and all other stakeholders.”

What’s next for PPG? The company could continue to focus on Europe, where valuations are more reasonable. A tie-up with EUR 14bn Evonik Industries [ETR:EVK] could be a possibility. Both companies have been increasing their silica manufacturing capacity. EVK has been a rumored acquirer itself, though, and is thought to be interested in AKZA’s specialty chemicals business, as well as Dutch competitor DSM [DSM.EN]. EVK majority owner RAG Stiftung could be a stumbling block to any deal, as the German foundation has gone on the record as saying that it’s not interested in selling shares. PPG isn’t the only US company interested in Europe. Warren Buffett’s General Reinsurance recently purchased a 3% stake in German chemical company Lanxess [ETR:LXS], and this morning Deere & Company [NYSE:DE] announced the purchase of privately held road construction equipment company Wirtgen Group for EUR 4.36bn in cash. Wirtgen had EUR 2.6bn in sales last year. The deal is expected to close in 1Q18 and be accretive to DE’s EPS. We expect that it won’t be the last deal in the space. Blackstone Group [NYSE:BX] recently raised a USD 40bn fund, with USD 20bn coming from Saudi Arabia, to invest in infrastructure businesses.

Patterson Companies [NASDAQ:PDCO] announced that Chairman and CEO Scott Anderson has stepped down, effective immediately. Both Anderson and the board “mutually determined that now is the time for a new leader to guide PDCO going forward.” The 49 year-old was named CEO in 2010 and has overseen a recent transformation. PDCO doubled the size of its veterinary business with a USD 1.1bn acquisition in 2015 and divested its medical business later that year for USD 717m. Now split roughly 50/50 between dental and animal health businesses, PDCO has been focused on implementing a new enterprise resource planning initiative. Back before the medical divest, PDCO jumped on our radar as a possible three-way breakup candidate. It appears that the company plans to hold on to its lower margin animal health business for now, but the candidate picked as the next CEO could offer some hints into how the company views its future portfolio. Former CEO and Director James Wiltz has been appointed as interim CEO while the board searches for a replacement. Anderson has agreed to serve in an advisory capacity to the company through June 2019. PDCO also restated its previously announced fiscal 2018 guidance.