Hillshire Brands Co. authorized takeover talks with Tyson Foods Inc. and Brazil’s JBS SA as the $6.7 billion bidding war for the maker of Jimmy Dean sausages and Ball Park hot dogs escalated.
The contest for Hillshire illustrates the desire of traditional meatpackers to gain consumer brands that offer fatter profit margins than those available from slaughtering livestock.
The Chicago-based company was known as Sara Lee Corp. before spinning off its tea and coffee segment and renaming itself Hillshire Brands in June 2012. It’s since focused on improving lunch-meat quality, creating new hot-dog flavors and winning over more customers with lower-calorie breakfast sandwiches.
Pilgrim’s Pride, the chicken producer 75 percent owned by JBS, raised its offer to $55 a share from $45, Hillshire said in a statement today. That topped a $50 a share bid last week from Tyson, the second-largest U.S. pork producer.
The $6.7-billion bid is the second from Greeley, Colorado- based Pilgrim’s Pride. Prior to its first bid, Hillshire had itself made a $6.6 billion offer to buy Pinnacle Foods Inc., producer of brands including Vlasic pickles.
Hillshire jumped 8 percent to $57.90 in pre-market trading in New York today.
Hillshire said today that it’s not making any recommendation regarding either of the competing proposals, and it won’t withdraw or alter its advice for the planned acquisition of Pinnacle Foods. A condition of both Tyson and Pilgrim’s Pride’s earlier offers was that Hillshire scrap an agreement to buy the Birds Eye frozen-foods maker.
For JBS, which slaughters and packages beef and poultry, buying Hillshire would push it further into higher-margin, branded prepared foods. JBS spent about $17 billion on acquisitions in the past decade to overtake Tyson in the meat industry. Chief Executive Officer Wesley Batista said May 23 that his company will keep expanding through acquisitions. Hillshire would be the company’s largest U.S. takeover.
Pilgrim’s Pride said today it expects cost savings from the proposed takeover to exceed $300 million annually, and that the purchase would boost earnings per share immediately.