Tyson Foods Makes $6.8 Bln Rival Bid For Hillshire Brands

(RTTNews) - Meat products provider Tyson Foods, Inc. (TSN) said Thursday that it has offered to acquire Hillshire Brands Co. (HSH) for $6.8 billion, trumping a rival $6.4 billion bid made by chicken products maker Pilgrim's Pride Corp. (PPC) just two days earlier.

Tyson noted that the acquisition of Hillshire would enable it to expand into the breakfast foods category. Shares of Hillshire are currently gaining more than 15 percent.

Springdale, Arkansas-based Tyson Foods has made an unsolicited offer to acquire Chicago, Illinois-based Hillshire for $50 per share in cash, compared to Pilgrim's Pride offer of $45 per share, made on Tuesday. The offer price represents a 11 percent premium to Hillshire's closing stock price of $44.99 on Wednesday.

According to Tyson, its offer represents a "superior alternative" to Hillshire's deal to acquire Parsippany, New Jersey-based convenience foods company Pinnacle Foods Inc. (PF).

Tyson noted that its proposed offer price represents a 35 percent premium to the Hillshire's unaffected closing price of $36.95 per share on May 9, 2014, the day prior to Hillshire's announcement of its proposed deal to acquire Pinnacle Foods.

Greeley, Colorado-based Pilgrim's Pride said its $4.6 billion proposal has the unanimous support of its board of directors as well as its majority owner JBS S.A.

The operator of chicken processing plants and prepared-foods facilities said it expects to finance the acquisition with a combination of existing cash balances and new debt financing. Pilgrim's also said it intends to make Chicago, Hillshire's homeland, a major center of North American operations.

Pilgrim's Pride has noted that a sale of Hillshire at the indicated price offered superior value and far greater certainty to Hillshire shareholders than the contemplated Pinnacle transaction.

On May 12, Hillshire agreed to acquire Pinnacle Foods, the maker of Birds Eye frozen foods, Duncan Hines baking mixes and frostings, and Vlasic shelf-stable pickles, in a cash and stock transaction with a total enterprise value of $6.6 billion.

Under the terms of the deal, each Pinnacle Foods share would be exchanged for $18 in cash and 0.50 shares of Hillshire stock. The transaction is expected to close by September and be immediately accretive to Hillshire's earnings.

Tyson Foods noted that a combination with Hillshire would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of branded and private-label products, including Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm. Hillshire is the maker of Ball Park hot dogs and Jimmy Dean sausages.

According to Tyson, the strength of Hillshire's products in the breakfast category would allow it to capture opportunities from shifting consumer trends in this attractive and fast-growing daypart where it currently has little presence.

Further, the company expects to realize substantial benefits from full integration of the protein value chain, as stable and consistent demand for protein products will enable it to best utilize its position and resources to maximize shareholder value.

Tyson added that there was no financing condition to the proposal, as it has secured a fully committed bridge facility from Morgan Stanley Senior Funding, Inc., that is expected to be joined by JP Morgan Securities LLC in the very near future. The proposal has the unanimous support of Tyson's board of directors and is subject to the termination of Hillshire's merger agreement with Pinnacle.

Tyson expects the proposed transaction to be accretive to its earnings per share in the first full year after completion.

In Thursday's regular session, TSN is trading at $42.83, up $2.08 or 5.10 percent on a volume of 655,306 shares. HSH is currently trading at $51.77, up $6.96 or 15.52 percent on a volume of 8.91 million shares.