Tyson Foods on Monday offered Hillshire Brands $63 per share in cash to acquire all outstanding shares of the business, besting offers put forth by Pilgrim's Pride and ultimately causing Pilgrim's to withdraw from the bidding war.
Both Tyson and Pilgrim's last week submitted offers to purchase Hillshire Brands, conditional on the company's termination of a previous agreement to acquire Pinnacle Foods.
The first offer came from Pilgrim's at $45 per share, followed by an increase to $55 per share. Hillshire offered $50 per share, followed by its final offering of $63 per share.
The all-cash transaction is valued at approximately $8.55 billion, including Hillshire Brands' outstanding net debt, and represents a multiple of 16.7x trailing 12 months adjusted EBITDA or 10.5x including $300 million in synergies, a statement from Tyson said.
Hillshire's board, however, has not changed its plans toward the Pinnacle merger, and is "not making any recommendation with respect to the Tyson offer," a statement released Monday said.
"Hillshire Brands does not have the right to terminate the merger agreement with Pinnacle Foods on the basis of the Tyson Foods offer or enter into an agreement with Tyson Foods prior to its termination. There can be no assurance that any transaction will result from the Tyson Foods offer," the statement said.
Tyson's offer will remain in effect until December 12, 2014, the final termination date of the Hillshire Brands/Pinnacle Foods agreement. If that agreement is terminated in accordance with its terms, Hillshire Brands would be able to accept the offer, with the result that binding definitive agreements could become effective, Tyson said.
Offer driven by prepared foods market
Donnie Smith, Tyson CEO, says the acquisition would "represent a defining moment for Tyson Foods."
"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 #1 and #2 brands in numerous categories," he said.
Hillshire currently markets meat products branded as Hillshire Farms, Jimmy Dean, Ball Park and others. Tyson markets a variety of ready-made meat products and breakfast offerings, like roast kits and frozen sandwiches.
"After a disciplined process to identify ways of growing our Prepared Foods segment, we are convinced that combining Tyson and Hillshire Brands would make strategic, financial and operational sense and would stabilize earnings by increasing return on sales and de-commoditizing our business," Smith said.
John Tyson, chairman of the board, added that Tyson Foods has a history of growing through strategic acquisition.
"It is the view of the board of directors that this is truly a transformational opportunity and one that best fits with our strategic plan while enhancing our margins and creating long-term shareholder value," he said.