Tyson Foods $8.55 Billion Offer Should Win Hillshire Brands

Tyson Foods, Inc. announced Monday that it has submitted a “unilaterally binding offer” to acquire all outstanding shares of The Hillshire Brands Co. for $8.55 billion.

The $63 per share cash offer is the largest in Tyson Foods’ history.

The offer is also subject to Hillshire Brands being released from its $4.3 billion existing agreement to acquire Pinnacle Foods Inc., which includes a $163 million break-up fee.

Tyson Foods outbid Pilgrim’s Pride in the pursuit of Hillshire Brands. Pilgrim’s had made a $7.7 billion offer for Hillshire Brands.

“The Hillshire Brands acquisition would represent a defining moment for Tyson Foods,” said Donnie Smith, Tyson’s president and CEO. “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.”

The offer was unanimously approved by the board of directors of Tyson Foods. The offer will remain in effect until December 12, 2014, the final termination date of the Hillshire Brands/Pinnacle Foods agreement.

“Tyson Foods has a history of growing through strategic acquisition,” said John Tyson, Tyson Foods chairman of the board, “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.”

Tyson said it is prepared to issue shares to maintain the company’s investment grade credit rating.

Several highlights of the deal, according to Tyson Foods include:

• Tyson said it expects to realize annual synergies in excess of $300 million driven primarily by operational efficiencies, purchasing, distribution, supply chain efficiencies, and upgrading raw materials;
• Tyson said its pork processing operations would benefit from stable and consistent demand for its raw materials for use in Hillshire Brands’ branded, value-added products; and
• Tyson expects that the proposed transaction would be marginally accretive in the first full fiscal year after completion and substantially accretive thereafter.

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, Ball Park, State Fair and Hillshire Farms.

“In particular, the strength of Hillshire Brands’ products in the breakfast category would allow Tyson to capture opportunities in this attractive and fast-growing day part,” Tyson Foods said in a statement announcing the deal.

The transaction will be funded by cash-on-hand and a fully committed bridge facility from Morgan Stanley Senior Funding, Inc. and JP Morgan Securities LLC.

Pilgrim’s Pride said Monday (June 9) it had officially withdrawn its offer to acquire Hillshire Brands.

“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 CEO. “Pilgrim’s will maintain its strong focus on operational excellence and shareholder value, while pursuing acquisition opportunities that advance our stated strategy. We appreciate the support of our shareholders, customers and team members throughout this process.”

Tyson Foods officials will hold a 9:30 am CST conference call to discuss details of the transaction.