(This story originally appeared on IFRe.com, a Thomson Reuters
By Michelle Sierra, Joan Magee and Davide Scigliuzzo
NEW YORK, May 30 (TRLPC/IFR) - Wall Street firms are joining
the sizzling four-party food fight involving Hillshire Brands,
Pilgrim's Pride, Pinnacle Foods and Tyson Foods. Morgan Stanley,
JP Morgan and Goldman Sachs are separately ready to serve the
necessary financing to the winner.
Morgan Stanley is providing the committed financing backing
meat processor Tyson Foods' unsolicited bid of US$6.8bn for food
producer Hillshire Brands. Tyson also said it expected JP Morgan
to join the facility in the "near future".
Meanwhile, Pilgrim's Pride, controlled by Brazilian
meatpacker JBS, is lining up roughly US$6bn in debt to finance a
hostile all-cash bid, valued at US$6.4bn, for Hillshire, and
JBS's relationship banks are pitching financing options to the
Separately, Goldman Sachs is providing US$5.3bn in loans to
back the US$6.6bn combination of Hillshire and branded food
producer Pinnacle Foods that was announced two weeks ago. The
facility consists of a US$500m revolving credit facility and a
US$4.8bn senior secured Term Loan B, according to a regulatory
HUNGRY, HUNGRY BANKERS
The four-way tug-of-war may stem from the lack of good
quality assets still available in the food and beverage market,
bankers said. The accessibility to cheap financing is further
enhancing M&A activity in the sector.
Based on completed deals, the M&A volume figure for the
beverage, food and tobacco processing industry is US$4.62bn,
according to Thomson Reuters data.
Whichever bid ultimately prevails, banks are expecting
chunky financing fees and plenty of ancillary business.
"It should be good for banks if Hillshire goes to an
investment grade strategic bidder," a senior banker said.
The tussle is already affecting existing lending
relationships. JBS said on Thursday it had postponed a US$750m
high-yield bond deal, due to be led by bookrunners Morgan
Stanley and Wells Fargo.
Although the bond was slated to refinance some 2016 bond
maturities and other shorter-term debt, a person with knowledge
of the situation suggested there was a conflict of interest as
Morgan Stanley was providing financing for the Tyson bid for
Bankers said the announcement of the committed financing
from Tyson adds a level of certainty that may make the Tyson bid
stronger. However, it is yet to be seen who will prevail.
"It depends," another banker said. "It will ultimately be up
to the company."
Earlier this month, the food and beverage industry welcomed
Hillshire's offer to buy Pinnacle for US$4.3bn. The
cash-and-stock deal would establish Hillshire as the owner of 10
packaged food brands that are either market leaders or second in
their categories, the companies said.
The two new bidders, however, turned up this week at the
buyers' table, derailing Hillshire's plans. On Thursday, Tyson
raised the stakes by bidding about US$6.8bn for Hillshire. Two
days earlier, Pilgrim's Pride also made an unsolicited bid for
Hillshire of nearly US$5.7bn plus debt, totalling about
(Reporting by Michelle Sierra, Joan Magee and Davide
Scigliuzzo; Editing by Jonathan Methven and Tessa Walsh)