(Adds Tyson comments on bidding war, analyst comment)
May 29 Tyson Foods Inc has offered to
buy Hillshire Brands Co for $6.3 billion, upstaging
Pilgrim's Pride Corp 's offer for the sausage company
earlier in the week, in a deal that would broaden Tyson's
supermarket food offerings.
Investors lauded Thursday's news, sending shares of
Hillshire, known for its Jimmy Dean and Hillshire sausages,
nearly 18 percent higher to $52.69, above Tyson's $50 per share
offer, suggesting that some investors expect a bidding war.
The overture from Tyson, the biggest U.S. meat processor,
trumped Pilgrim's $45 per share bid earlier this week.
Both all-cash bids include the assumption of Hillshire's
Tyson put the total value of its bid at $6.8 billion, based
on 125 million outstanding Hillshire shares and debt of roughly
About two weeks ago, Hillshire said it planned to buy
Pinnacle Foods Inc, known for its Birds Eye frozen
vegetables, in a deal it valued at $4.3 billion excluding debt.
That pact, considered less appealing by some investors and
analysts, could be in peril as the Tyson and Pilgrim's bids
require Hillshire to terminate the Pinnacle deal.
Hillshire said in a statement that it would thoroughly
review Tyson's proposal.
Pilgrim's, which valued its offer at $6.4 billion including
debt and a $163 million breakup fee, said it is considering its
options and would "update the markets in due course." Brazilian
meatpacking giant JBS SA owns about 75 percent of
Tyson executives would not comment on Pilgrim's offer, but
said on a media call that they were prepared to issue equity.
"We have a lot of flexibility in what we can do," Tyson
Chief Financial Officer Dennis Leatherby said.
As U.S. consumers add more protein and fresh food to their
diets, food sellers seek to turn the trend into profit.
"We thought this might happen given the heated land grab
underway in the food sector over the past year as companies
large and small scramble after choice assets to grow market
share, optimize and expand product lines, and whittle costs to
boost profits," Vicki Bryan, senior high yield analyst, at
corporate bond research service Gimme Credit, said in a note.
Tyson's prepared foods business focuses on foodservice
clients and private label. The acquisition would raise its
profile in the grocery aisle, where Hillshire also sells Aidells
artisan sausages, Ball Park hot dogs and Jimmy Dean bacon.
The company said the merger would provide it with "stable
and consistent demand for protein products".
Tyson said it secured financing from Morgan Stanley Senior
Funding Inc for the deal, which is expected to add to its
earnings in the first year after completion.
Shares of Tyson were up 6.6 percent at $43.43, while
Pilgrim's stock fell 1.5 percent to $25. Pinnacle shares were up
1.1 percent at $31.71.
(Reporting by Lisa Baertlein in New York and Devika Krishna
Kumar in Bangalore; Editing by Saumyadeb Chakrabarty, Bernadette
Baum and Andrew Hay)