June 11, 2014

Pilgrim's Pride offers to buy Hillshire BrandsPilgrim’s Pride Corp. offered to purchase packaged food company Hillshire Brands Co. in a $5.7 billion deal. According to the Chicago Tribune, this is just the latest news in a food industry shakeup that’s making waves.

Pilgrim’s Pride is a poultry producer, and made the offer depending on whether Hillshire decides to go forward with its proposal to purchase Birds Eye and Pinnacle Foods, a move it announced in mid-May. The source reported that the proposal by Pilgrim’s Pride was a $45-per-share cash offer and came after the companies met in Chicago in February.

“We feel confident that Hillshire shareholders will recognize the superior value this proposal represents for them,” Pilgrim’s Pride chief executive officer, Bill Lovette?, told the source.

The deal by Pilgrim’s Pride would fare better for shareholders than the company’s pending agreement to buy Pinnacle Foods. If Pilgrim’s Pride does buy Hillshire Brands, the company offered to pay a $163 million termination fee to Pinnacle for canceling the deal and to absorb $553 million in debt. According to the Tribune, the deal between Pilgrim’s Pride and Hillshire would have an enterprise value of approximately $6.39 billion.

“Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisors, Hillshire Brands’ Board will thoroughly review the Pilgrim’s Pride proposal,” Hillshire said in a statement.

Pilgrim’s Pride hopes to close the deal with Hillshire in the third quarter of 2014. However, that would be contingent on offers by other companies to purchase Hillshire Brands as well as the pending deal between Pinnacle Foods and Birds Eye.

Tyson steps in
Following the proposed deal by Pilgrim’s Pride, Tyson Foods offered Hillshire Brands $6.2 billion for the company.

Tyson is ahead of Pilgrim’s Pride in poultry production and the two companies are currently seeking to add other brand-named processed products to their names. The Associated Press reported that with more products, Tyson and Pilgrim’s Pride would be less vulnerable losses if the price of beef goes up and consumers turn to other products such as chicken.

Tyson Foods offered $50 per share, $5 more than Pilgrim’s Pride, according to the AP.

Other potential bidders for Hillshire Brands may include Cargill, Sanderson Farms and Kellogg.