Tyson Foods Inc., the second-largest U.S. pork producer, made an unsolicited $6.2 billion offer to buy Hillshire Brands Co., trumping a competing bid from Pilgrim's Pride Corp. for the maker of Jimmy Dean sausages.
Tyson is offering $50 a share, the Springdale, Arkansas- based company said Thursday. That's 35 percent more than Hillshire's last closing stock price before it received Pilgrim's $45-a-share unsolicited proposal on May 27. Hillshire traded as high as $52.18 today, indicating investors expect a higher offer.
Tyson, led by Chief Executive Donnie Smith, is looking to expand further into branded, value-added packaged foods that have wider margins and more stable earnings compared with its traditional commodity meat business. It bid for food processor and distributor Michael Foods Group Inc., controlled by Goldman Sachs Group Inc.'s private-equity arm, people familiar with the matter said in February. It subsequently lost out to a bid from Post Holdings Inc.
"This is a game-changer to how we look at prepared foods," Smith said today on a conference call.
Buying Hillshire would give Tyson meat brands that also include Ball Park hot dogs and Hillshire Farm as well as Sara Lee cakes. Tyson said it will realize "significant" cost saving from combining both companies' sales, marketing, distribution and supply-chain operations. The proposed takeover is subject to Hillshire terminating a $4.8 billion agreement to buy Pinnacle Foods Inc., owner of the Birds Eye frozen foods brand.
Buying Chicago-based Hillshire would be Tyson's biggest deal, surpassing its 2001 acquisition of beef producer IBP Inc., according to data compiled by Bloomberg.
Rival bidder Pilgrim's is the majority-owned U.S. chicken unit of Brazil's JBS SA, the world's largest meat producer. In a May 27 statement, Pilgrim's said it met with Hillshire in February and that its offer depends on the company dropping its bid for Pinnacle. The Pinnacle deal has been criticized by activist investor and Hillshire shareholder Eminence Capital LLC as too expensive.
"We would have preferred to make this proposal to you privately, but in light of current circumstances we believe that it is in the best interests of your and our shareholders to have current and accurate information about our proposal," Tyson's Smith said in a letter sent to Hillshire, a copy of which was included in today's statement.
No one at Hillshire and Pilgrim's could immediately be reached for comment on the Tyson offer. Hillshire said in a May 27 statement that it would review the Pilgrim's bid. JBS officials didn't immediately respond to requests for comment.
Tyson said today the total value of its offer is $6.8 billion, or a 13.4 times Hillshire's trailing 12-month earnings before interest, taxes, depreciation and amortization. The takeover would add to Tyson's earnings per share in the first full year after the deal's completion, according to the company.
Hillshire surged 15 percent to $51.78 at 9:42 a.m. in New York.
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