The Hillshire Brands board of directors has unanimously decided to withdraw its recommendation of the pending acquisition of Pinnacle Foods, citing that Tyson Foods’ offer to purchase Hillshire Brands for $8.55 billion or $63 per share is a superior proposal. The Hillshire board now recommends a vote against Hillshire's previously proposed $4.3 billion purchase of Pinnacle Foods.

The Hillshire Brands board on June 9 provided written notice to the board of Pinnacle Foods that it intended to change its recommendation. Upon receipt of that notification, Pinnacle Foods had the option to propose changes to the merger agreement that would make it a superior proposal to the one offered from meat and poultry processor Tyson Foods. Pinnacle Foods, whose brands include Armour, Hungry-Man, Vlasic and Wish-Bone, made no such proposal.

The original Hillshire-Pinnacle agreement was reached on May 12. Tyson made its $8.55 billion offer to purchase Hillshire Brands on June 8, after outbidding rival poultry processor Pilgrim’s, which had offered to purchase meat products company Hillshire Brands for $7.7 billion.

Hillshire Brands does not yet 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. Hillshire Brands expressed that it cannot assure any transaction will result from the Tyson Foods offer. 

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Pinnacle has option to terminate Hillshire-Pinnacle agreement

Under the terms of the merger agreement with Pinnacle Foods, Pinnacle Foods may terminate the Hillshire-Pinnacle merger agreement. The agreement states that if Pinnacle Foods terminates the agreement prior to a vote of Hillshire Brands stockholders, Pinnacle Foods may be entitled to a $163 million termination fee. If Pinnacle Foods decides not to terminate the agreement and instead requires Hillshire Brands stockholders to vote on the Pinnacle transaction, and Hillshire stockholders vote to reject it, Hillshire will then be entitled to terminate the merger agreement. If that happens, Pinnacle Foods may be entitled to receive a $43 million termination fee, followed by an additional $120 million under certain circumstances. 

Hillshire Brands, the parent company to brands like Jimmy Dean, State Fair and Ball Park, expects to hold its stockholder meeting as early as August. Hillshire Brands will also have the right to terminate the merger agreement on December 12, regardless of whether a vote of its stockholders on the Pinnacle Foods merger has taken place by then. Tyson Foods has said its offer will remain until December 12.

Tyson responds to Hillshire board recommendation

"We believe our offer to acquire Hillshire Brands for $63 per share in cash is a superior proposal for Hillshire Brands shareholders," said Donnie Smith, president and CEO of Tyson Foods. "We're pleased the Hillshire board has withdrawn its recommendation in favor of the Pinnacle agreement, and now recommends the Tyson Foods offer, all as expressly authorized by the Pinnacle agreement. We hope Pinnacle Foods will promptly accept the termination fee and not delay the ability of Hillshire Brands' shareholders to benefit from Tyson Foods' superior offer."