Pinnacle Foods on June 30 terminated its agreement to be purchased by Hillshire Brands. In doing so, Pinnacle paved the way for Tyson Foods to further pursue its planned acquisition of Hillshire.

Just two weeks after Hillshire Brands, a meat products company whose brands include Jimmy Dean, Ball Park and State Fair, offered to purchase Pinnacle Foods for $4.3 billion, the two largest poultry companies in the United States made unsolicited offers to purchase Hillshire Brands under the condition that Hillshire does not purchase Pinnacle Foods. Tyson Foods eventually made the highest bid for Hillshire at $8.55 billion or $63 per share, while Pilgrim’s withdrew its offer of $7.7 billion.

Hillshire reviewing Tyson offer

Hillshire Brands on June 16 announced that it was withdrawing its recommendation to the board that it proceed with the proposed agreement with Pinnacle Foods, calling Tyson Foods's offer a superior proposal. However, Hillshire said at the time that termination of the Pinnacle agreement would not necessarily lead to the approval of Tyson Foods’ proposal to purchase Hillshire.

With Pinnacle now out of the picture, Hillshire Brands is free to move forward with Tyson Foods’ proposal. “Consistent with its duties, the Hillshire Brands board will promptly review the Tyson offer,” the company stated in a press release.


In a paper filed with the United States Securities and Exchange Commission, Tyson Foods on July 1 made the following statement: “We have seen the Pinnacle Foods announcement and understand the board of directors of Hillshire Brands will now consider our previously announced offer. However, we have no additional comment at this point.”

Pinnacle Foods taking payment, reinvesting in company

Pinnacle Foods, pursuant to the terms of the merger agreement with Hillshire Brands, is entitled to receive a $163 million cash payment from Hillshire Brands as a result of the termination of the agreement. Pinnacle indicated that one-time fees and expenses associated with the merger agreement, including external advisors and employee incentives, are expected to total approximately $25 million. 

Pinnacle Foods, the maker of brands like Hungry-Man, Armour and Vlasic, in a press release said it expects to pay minimal cash taxes on the payment from Hillshire. The company plans to use the net cash proceeds to reduce debt and, as a result, expects net interest expense for the year to fall slightly below the $100 million it previously disclosed.  The interest savings are expected to be reinvested in the business in 2014. 

Commenting on the announcement, Pinnacle Foods Chief Executive Officer Bob Gamgort stated: "We're excited to continue delivering long-term value for our shareholders through our strategy of reinvigorating iconic brands.  We continue to manage well through the difficult industry and category environment that we have discussed previously.  The termination payment provides us with increased optionality in executing our strategy."