hillshire brands Jimmy Dean Copyright Joe Raedle/Getty Images

Tyson Wins Bidding War for Hillshire

Tyson's $8.6 billion offer – which includes the assumption of Hillshire debt – finally beats out Brazil's Pilgrim's Pride buyout bid.

NEW YORK – U.S. meat giant Tyson Foods (IW 500/41) won the bidding war to take over sausage maker Hillshire Brands (IW 500/228) Monday, when its sharply increased bid forced Brazilian-owned rival Pilgrim's Pride to pull out.

Tyson submitted a $63 dollar a share all-cash offer, topping Pilgrim's Pride's previous $55 bid, and Pilgrim's, mainly a chicken processor, withdrew from the two-week-old fight.

Locked in the low-margin meat processing industry, both companies were seeking to move downstream into branded, processed foods where profits are higher and income more stable.

Tyson's bid was worth $8.6 billion, including the assumption of Hillshire debt, far above the $6.4 billion first offered on May 27 by Pilgrim's Pride.

Hillshire, which makes Jimmy Dean sausages and Ball Park hot dogs, acknowledged the new offer, while refraining from formally accepting it.

To allow the Tyson takeover to go through, Hillshire must first undo its own early May commitment to take over another branded foods business, Pinnacle Foods.

Tyson has said its offer is contingent on Hillshire canceling the takeover of Pinnacle, which is now expected given Tyson's increased offer. But canceling the Pinnacle deal will cost Hillshire, or its buyer, a $163 million termination fee.

Tyson said bringing the two businesses together would deliver $300 million in annual savings to the combined company.

Its pork processing operations would gain from "stable and consistent demand for its raw materials for use in Hillshire Brands' branded, value-added products."

Defining Moment for Meats

"The Hillshire Brands acquisition would represent a defining moment for Tyson Foods," said Donnie Smith, Tyson's president and chief executive.

"Our strategy has been to grow our prepared foods business, and it has been our aspiration to be a leader in retail prepared foods just as we are in chicken. Now we will have those iconic number one and number two brands in numerous categories."

Pilgrim's, which is owned by Brazil's JBS, the world's largest meat processor, suggested the price for Hillshire had become too steep.

"As a disciplined acquirer, we determined that it was in the best interests of our shareholders not to increase our proposed price of $55.00 per share in cash," said Bill Lovette, Pilgrim's chief executive, in a statement.

Tyson's higher bid of $63 a share was 70.5% above Hillshire's share price just before it announced the Pinnacle deal.

The increased bid sent Hillshire shares jumping 4.9% to $61.85 on Monday.

Meanwhile Tyson shares were down 5.2% to $38.05, Pilgrim's fell 6% $24.62, and Pinnacle rose 0.5% to $31.79.

Copyright Agence France-Presse, 2014

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