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Business

Tyson agrees to buy Hillshire for $63 a share

By
Reuters
Published June 9, 2014, 9:47 a.m. ET

Tyson Foods Inc. prevailed over Pilgrim’s Pride Corp. in a bidding war between meat processors over Hillshire Brands Co., with an increased offer valuing the maker of Jimmy Dean sausages at $8.55 billion including debt.

Tyson, the world’s second-biggest meat processor, said Monday it would offer $63 per share for Hillshire, a premium of nearly 7 percent to Hillshire’s closing price on Friday.

The offer followed a bidding process that concluded Sunday. Pilgrim’s Pride said it had withdrawn its offer.

Hillshire’s shares rose about 5 percent to $62 in premarket trading. The stock closed at $36.95 on May 9, just before Hillshire offered to buy Pinnacle Foods Inc., the maker of Birds Eye frozen vegetables, in a deal valued at $4.3 billion.

Tyson’s offer remains conditional on the Pinnacle deal being called off. However, Hillshire said it had not approved the Tyson offer and had not changed its recommendation that shareholders vote for the deal.

Pilgrim’s Pride, majority owned by Brazil’s JBS SA, raised its offer last week to $55 per share from $45, valuing Hillshire at $7.7 billion including debt.

“We determined that it was in the best interests of our shareholders not to increase our proposed price,” Pilgrim’s Pride said in a statement.

Tyson had earlier offered $50 per share, valuing Hillshire at $6.8 billion, including $500 million in debt.

The bidding war had pitted Tyson against JBS as they seek to expand margins that have been hit by high prices for beef and pork, and rising feed costs.

Analysts had said Tyson would likely emerge victorious, given the relative strength of its balance sheet.

Tyson had long-term debt of $1.89 billion and cash and cash-equivalents of $438 million as of March 29.

Tyson said Monday the deal would be funded with existing cash and a fully committed bridge facility from Morgan Stanley Senior Funding Inc. and JP Morgan Securities LLC.

Hillshire shares were trading at $61.75 about 15 minutes before the start of trading on the New York Stock Exchange.