Hillshire Brands Makes Moves to End Pinnacle Foods Acquisition
17 Jun 2014 --- The board of directors at Hillshire Brands has withdrawn its recommendation of the pending acquisition of frozen foods maker Pinnacle Foods, in light of the favourable proposal from Tyson Foods to acquire Hillshire. Earlier this month Tyson increased its offer to buy Hillshire to $63 a share, beating Pilgrim’s Pride Corp for the company, which makes Jimmy Dean sausages and other meat brands.
The Hillshire board stated that the $7.7bn takeover bid from Tyson Foods is a better deal for its investors, and so therefore constitutes a superior proposal. In a statement, the company said it recommends therefore that its shareholders vote against buying Pinnacle.
Industry insiders believe Pinnacle, which makes Wish-Bone salad dressings, may attempt to secure a payment from Hillshire before allowing it to be released from the $4.3bn merger agreement that was arranged in May this year. Pinnacle could be entitled to a termination fee of up to $163m according to reports.
“We hope Pinnacle Foods will promptly accept the termination fee and not delay the ability of Hillshire Brands’ shareholders to benefit from Tyson Foods’ superior offer,” Tyson chief executive office Donnie Smith said today in a statement.
A deal with Tyson has not yet been agreed, although reports last week stated that Hillshire had already notified Pinnacle that it no longer planned to recommend the Pinnacle deal to its shareholders.
Buying Hillshire will enable Tyson to expand its value-added prepared foods business, according to reports. It will also release pressure on Tyson’s need to rely on the turbulent meat business, by expanding it into new areas.
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 Farm. 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.
“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.
Hillshire, which was known as Sara Lee Corp before June 2012, has recently focused on improving the quality of its lunch-meats, new hotdog varieties and lower-calorie breakfast sandwich ranges.
The offer by Tyson 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. 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.
