(Bloomberg) -- Conagra Brands Inc. has approached Pinnacle Foods Inc. about a potential deal that would add popular freezer-aisle brands to its roster at a time when frozen-food sales are booming, according to people familiar with the matter.
The rival food manufacturers have had contact in recent weeks, said the people, who asked not to be identified as the details aren't public. Deliberations are at a preliminary stage and there's no guarantee a deal will be reached, the people said.
Pinnacle shares extended gains, rising as much as 9.2 percent in New York trading. The stock was up 2.6 percent at 2:20 p.m., valuing the company at about $7.9 billion. Conagra shares pared gains to trade little changed at $38.42, for a market value of $15 billion.
A representative for Pinnacle said the company doesn't respond to market speculation. Conagra declined to comment.
After slumping for years, frozen food has become a bright spot in the grocery store as packaged-food companies struggle to find growth elsewhere. Even millennials, a generation known for its foodie tastes, are embracing frozen vegetables and meals, which are convenient and less expensive than takeout.
Activist fund Jana has urged Pinnacle to explore a sale after disclosing a 9.5 percent stake in the packaged food maker in April. The New York-based hedge fund, run by Barry Rosenstein, said in a filing that it thinks the company is in a good position to consider consolidation given its strength in the frozen foods industry.
Jana also has history with Conagra, which in 2015 agreed to add two directors to its board in a settlement with the fund. It currently owns a stake in Conagra of less than 1 percent, according to data compiled by Bloomberg.
--With assistance from Craig Giammona.
To contact the reporters on this story: Ed Hammond in New York at ehammond12@bloomberg.net;Dinesh Nair in London at dnair5@bloomberg.net
To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net;Aaron Kirchfeld at akirchfeld@bloomberg.net
©2018 Bloomberg L.P.
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