Tyson Foods Next to Make Play for Hillshire Brands
Latest proposal tops Pilgrim's Pride's $6.4 billion offer
SPRINGDALE, Ark. -- Following a similar move by Pilgrim's Pride Inc., Tyson Foods Inc. has announced a proposal to acquire The Hillshire Brands Co. for $6.8 billion.
Springdale, Ark.-based Tyson has been building up its line of prepared foods to compete with Hillshire Brands and Hormel Foods, and targeting convenience stores is part of that strategy. Tyson Foods is one of the world's largest processors and marketers of chicken, beef and pork. It produces a wide variety of protein-based and prepared food products and is a market leader in the retail and foodservice markets it serves.
The Tyson proposal would provide Hillshire shareholders with an immediate and significant return on their investment in Hillshire and constitutes a significantly superior alternative to Hillshire's previously announced agreement to acquire Pinnacle Foods Inc., Tyson said.
Tyson's proposed price represents a 35% premium to the unaffected closing price per share of the company's common stock on May 9, 2014, the day prior to the announcement of Hillshire's proposed agreement to acquire Pinnacle. At $50 per share in cash, the Tyson proposal represents a multiple of 13.4x Hillshire's trailing adjusted EBITDA.
Pilgrim's Pride's $6.4 billion offer represents $45 per share and 12.5x Hillshire's trailing adjusted EBITDA.
Earlier this month, Hillshire Brands Co., Chicago, and Pinnacle Foods Inc., Parsippany, N.J., entered into an agreement under which Hillshire Brands would acquire all outstanding shares of Pinnacle Foods in a cash and stock transaction of approximately $6.6 billion, including Pinnacle Foods' outstanding net debt. The deal would bring together two highly complementary businesses with leading, iconic brands to create a diversified food company with estimated 2014 sales of $6.6 billion. Combined, the companies would have leading positions in key frozen, refrigerated and center-of-store grocery and convenience store foodservice categories.
For Tyson, a combination with Hillshire would reposition Tyson as a leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands and private-label products, including Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm.
The strength of Hillshire's products in the breakfast category would allow Tyson to capture opportunities from shifting consumer trends in the fast-growing day-part where Tyson has little presence today, the company said.
"We believe that there is a strong strategic, financial and operational rationale for the combination of Tyson and Hillshire," said Donnie Smith, Tyson Foods president and CEO. "Our proposal provides Hillshire shareholders with an immediate cash premium for their shares that we believe is both greater and more certain than what can be attained in the near term by the company either on a standalone basis or in combination with any other food processing company. Tyson's shareholders will benefit from the considerable new opportunities that come with this extraordinary strategic fit."
This proposal has the unanimous support of the Tyson Board of Directors and is subject to the termination of Hillshire's merger agreement with Pinnacle.