Update: Tyson Foods Wants to Buy Hillshire Brands In $6.8B Deal

by Lance Turner and Marty Cook  on Thursday, May. 29, 2014 11:44 am  

Tyson Foods Inc. of Springdale on Thursday proposed the biggest acquisiton in its history, offering to purchase Hillshire Brands of Chicago for $50 per share, or about $6.8 billion. 

The meat processor said its offer represents a 35 percent premium for Hillshire shareholders, who were dealing a takeover offer on Tuesday and its own bid to purchase another food company, announced on May 12.

Hillshire is a meat processor that makes its namesake lunchmeats, Ball Park hot dogs and Jimmy Dean sausages. It has about 9,000 employees and $4 billion in annual sales. During a conference call on Thursday, Tyson Foods CEO Donnie Smith said a combination of the two food companies would be a "great strategic fit for us."

"In particular, we believe that the strength of Hillshire's products in the breakfast category would allow Tyson to capture opportunities from shifting consumer trends in this attractive and fast-growing daypart where Tyson has little presence today," Smith said.

Tyson Foods' proposal comes two days after chicken producer Pilgrim's Pride of Greeley, Colorado, offered to acquire Hillshire for $5.58 billion, or $45 per share.

The offer also comes as Hillshire is considering its own proposal to buy Pinnacle Foods, which makes Birds Eye frozen vegetables, Duncan Hines cake mixes and Hungry Man frozen dinners, in a deal worth $4.2 billion. Both Tyson Foods' and Pilgrim's Pride's offers are contingent upon Hillshire scrapping the Pinnacle purchase.

Hillshire had not responded to Tyson Foods' offer as of 11 a.m. Thursday. On Tuesday, Hillshire said it would "thoroughly" review Pilgrim's Pride's offer, though it continues "to strongly believe in the strategic merits and value creation potential provided by the proposed transaction with Pinnacle Foods."

If the deal goes through, it would be Tyson Foods' biggest acquisition ever, topping its $3.2 billion cash-and-stock merger with beef and pork company IBP Inc. of Dakota Dunes, South Dakota, announced in 2001. The deal expanded Tyson Foods' market share and put the company back in the pork business.

"We believe that there is a strong strategic, financial and operational rationale for the combination of Tyson and Hillshire," Smith said in a news release. "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."

In a conference call, Tyson Foods executives said their offer wasn’t a response to Pilgrim's Pride. Smith said the company had no contact with Hillshire until Thursday morning, when it notified Hillshire if the offer by phone and letter.

Rather, Smith said the proposal came from planning about the company's future. He said company leaders met about a year ago to discuss long-term plans, including growing Tyson's prepared food segment.

Buying Hillshire Brands would be key to that growth. Smith said Tyson doesn't have much exposure in the breakfast foods segment, a point of strength for Hillshire. Tyson Foods' expertise in marketing and distribution and focus on private labels would mesh well with Hillshire's branded products, executives said.



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