Defining Moment: Tyson Foods Wins Bidding War for Hillshire

Tyson Foods Inc. announced Monday it has submitted a unilaterally binding offer to acquire all outstanding shares of The Hillshire Brands Co. for a price of $63 per share in cash. 

According to a Tyson news release, the offer is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods Inc. in accordance with the terms thereof. 

It follows a bidding process conducted by Hillshire Brands that ended Sunday.

The all-cash transaction is valued at approximately $8.55 billion. The offer was unanimously approved by Tyson’s board of directors of Tyson Foods.

“The Hillshire Brands acquisition would represent a defining moment for Tyson Foods,” Donnie Smith, Tyson’s president and chief executive officer, said in the release.  “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 No. 1 and No. 2 brands in numerous categories.”

Tyson board chairman John Tyson called the acquisition a transformational opportunity for the company.

“Tyson Foods has a history of growing through strategic acquisition,” he said. “This opportunity is one that best fits with our strategic plan while enhancing our margins and creating long-term shareholder value.”

The Tyson family and the board are prepared to issue shares to maintain the company’s investment grade credit rating, according to the release.

The combination of Tyson and Hillshire Brands would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands, including Tyson, Wright Brand, Jimmy Dean and Ball Park.

The transaction would be funded by cash on hand and a fully committed bridge facility from Morgan Stanley Senior Funding, Inc. and JP Morgan Securities LLC. Tyson expects to maintain its investment grade credit rating and is prepared to issue debt and equity as is prudent.

Tyson anticipates the substantial cash flow from the combined companies will enable it to rapidly pay down debt.

The offer will remain in effect until December 12, 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.

Any transaction would be subject to regulatory approval and other customary closing conditions.

Morgan Stanley and JP Morgan are acting as financial advisors to Tyson Foods, and Davis Polk & Wardwell LLP is acting as its legal counsel.