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Tyson Raises Hillshire Bid to $7.7 Billion to Beat Pilgrim’s

June 9, 2014
hot dogs on grill
  

Tyson Foods Inc., the largest U.S. meat company, raised its offer for Hillshire Brands Co. to about $7.7 billion, outbidding Pilgrim’s Pride Corp. to gain control of the maker of Jimmy Dean sausages and Ball Park hot dogs.

Tyson is offering $63 a share, it said today in a statement. Including net debt, the deal is worth $8.55 billion, the Springdale, Arkansas-based company said.

Hillshire said in a separate statement that it hasn’t agreed to Tyson’s latest offer and hasn’t made any recommendation. Pilgrim’s said it withdrew its proposal.

Tyson outbid Pilgrim’s, the chicken producer 75 percent owned by Brazil’s JBS SA, which had the high offer previously at $55 a share. After the bidding reached that level, Hillshire agreed to enter talks with both suitors.

The contest for Hillshire illustrates traditional meatpackers’ desire to gain consumer brands that offer fatter profit margins than those available from slaughtering livestock. Tyson, led by Chief Executive Officer Donnie Smith, is looking to expand further into branded, value-added packaged foods that have wider margins and more stable earnings compared with its traditional commodity meat business.

 

Pinnacle Foods

 

Hillshire, known as Sara Lee Corp. before splitting off its tea and coffee segment in June 2012, has focused since the spinoff on improving lunch-meat quality, creating new hot dog varieties and winning over more customers with lower-calorie breakfast sandwiches. Combining Tyson and Hillshire will create a company with $39.4 billion of annual sales and $1.2 billion of net income, according to data compiled by Bloomberg based on trailing 12-month figures.

Hillshire rose 4.9 percent to $61.81 at 8:30 a.m. before the start of regular trading in New York. Tyson dropped 1 percent to $39.70.

Both Pilgrim’s Pride and Tyson had insisted when agreeing to enter the talks that Hillshire would drop its earlier agreement to buy Pinnacle Foods Inc., the producer of brands including Vlasic pickles, for $6.6 billion including debt. Under terms of that deal, Hillshire would owe a $163 million breakup fee.

Tyson made an unsolicited $50-a-share, or $6.2 billion, offer for Hillshire on May 29, trumping Pilgrim’s first proposal. That was 35 percent more than Hillshire’s closing price before it received Pilgrim’s unsolicited proposal May 27. Buying Hillshire would be Tyson’s biggest deal, surpassing its 2001 acquisition of beef producer IBP Inc., according to data compiled by Bloomberg.

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