Tyson Foods has increased its bid for Hillshire Brands, prompting bidding rival poultry processor Pilgrim’s to retreat after a bidding battle that began May 27. Tyson’s latest offer is to acquire all outstanding shares of Hillshire Brands for a price of $63 per share in cash for a total of approximately $8.55 billion.
The combination of Tyson and Hillshire Brands would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands, including Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm. In particular, the strength of Hillshire Brands' products in the breakfast category would allow Tyson to capture opportunities in this fast-growing market.
"The Hillshire Brands acquisition would represent a defining moment for Tyson Foods," said Donnie Smith, Tyson's president and CEO. "Our strategy has been to grow our prepared foods business, and it has been our aspiration to be a leader in retail prepared foods just as we are in chicken. Now we will have those iconic No. 1 and No. 2 brands in numerous categories."
"Tyson Foods has a history of growing through strategic acquisition," added John Tyson, chairman of the Tyson Foods board. "It is the view of the board of directors that this is truly a transformational opportunity and one that best fits with our strategic plan while enhancing our margins and creating long-term shareholder value." The Tyson family and the board are prepared to issue shares to maintain the company's investment grade credit rating.
Meat and poultry processor Tyson Foods’ latest proposal to purchase Hillshire Brands, like the previous bids submitted by Tyson and Pilgrim’s, is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods.
Hillshire considering Tyson offer
Hillshire Brands, in a statement posted on its website, stated that it has not yet accepted Tyson’s latest offer and for now remains committed to its plans to purchase Pinnacle Foods, which has a portfolio that includes the Armour, Hungry-Man, Vlassic, Van de Kamp’s, Duncan Hines and Aunt Jemima brands.
“The Hillshire Brands board of directors has not approved the Tyson Foods offer, has not changed its recommendation regarding the Pinnacle merger, and is not making any recommendation with respect to the Tyson offer,” Hillshire Brands stated. “Hillshire Brands does not have the right to terminate the merger agreement with Pinnacle Foods on the basis of the Tyson Foods offer or enter into an agreement with Tyson Foods prior to its termination. There can be no assurance that any transaction will result from the Tyson Foods offer.”
Pilgrim's backs out of bidding war
Tyson’s latest purchase offer follows its earlier proposal to purchase Hillshire Brands for $50 per share in an all-cash offer valued at $6.8 billion. That offer was made on May 29, two days after Pilgrim’s offered to buy Hillshire for $45 per share or $6.4 billion. Pilgrim’s upped its bid to $55 per share or $7.7 billion on May 3, but after the latest proposal from Tyson, has withdrawn from the bidding.
"As a disciplined acquirer, we determined that it was in the best interests of our shareholders not to increase our proposed price of $55 per share in cash," said Bill Lovette, Pilgrim's CEO. "Pilgrim's will maintain its strong focus on operational excellence and shareholder value, while pursuing acquisition opportunities that advance our stated strategy. We appreciate the support of our shareholders, customers and team members throughout this process."
Should Hillshire Brands accept Tyson’s $8.55 billion offer, the transaction would be funded by cash on hand and a fully committed bridge facility from Morgan Stanley Senior Funding and JP Morgan Securities LLC. Tyson expects to maintain its investment grade credit rating and is prepared to issue debt and equity as is prudent. Tyson anticipates the substantial cash flow from the combined companies will enable it to rapidly pay down debt.
Tyson’s latest offer was unanimously approved by the board of directors of Tyson Foods. The offer will remain in effect until December 12, the final termination date of the Hillshire Brands/Pinnacle Foods agreement. If that agreement is terminated in accordance with its terms, Hillshire Brands would be able to accept the offer, with the result that binding definitive agreements could become effective. Any transaction would be subject to regulatory approval and other customary closing conditions.