Meat Meet: Pilgrim's Pride Makes Play for Hillshire Brands

Meat Meet: Pilgrim's Pride Makes Play for Hillshire Brands

Company offers $6.4 billion deal to acquire Hillshire Brands, if Hillshire dumps Pinnacle deal

Pilgrim's Pride Corporation on Tuesday announced its proposal to acquire The Hillshire Brands Company for $45 per share in cash, in a transaction valued at $6.4 billion.

The transaction would create a "leading branded, protein-focused" company, Pilgrim's says. The company currently represents mostly chicken, but the addition of Hillshire would bring in brands like Jimmy Dean, Ballpark, Hillshire Farms and others.

The deal offers Hillshire shareholders 12.5 times Hillshire's trailing adjusted earnings before interest, taxes, depreciation and amortization, and has the unanimous support of the Board of Directors of Pilgrim's, as well as the support of JBS S.A., the majority owner of Pilgrim's.

Pilgrim's offers $6.4 billion deal to acquire Hillshire Brands, if Hillshire dumps Pinnacle deal

The deal follows a proposal from Hillshire itself earlier this year to acquire Pinnacle Foods, Inc., which represents brands like Duncan Hines, Birds Eye, Mrs. Butter-worth's and others.

But if Hillshire accepts the Pilgrim's deal, it would be required to abandon Pinnacle acquisition plans.  Pilgrim's notes that its all-cash offering to acquire Hillshire provides a "substantially superior alternative" to the Pinnacle deal.

If approved, Pilgrim's would also pay a $163 million termination fee, as Pinnacle and Hillshire have already signed a definitive agreement.

According to a statement from Hillshire, the company plans to review the unsolicited proposal from Pilgrim's, but has not indicated its leanings.

"We continue to strongly believe in the strategic merits and value creation potential provided by the proposed transaction with Pinnacle Foods. Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisors, Hillshire Brands’ Board will thoroughly review the Pilgrim’s Pride proposal," the statement said.

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If Hillshire takes the deal with Pilgrim's, it is anticipated that the proposed transaction would close in the third quarter of 2014 and would be subject to customary closing conditions and the termination of Hillshire's merger agreement with Pinnacle.

Pilgrim's says the opportunity could provide the two companies with mutual benefits, including complementary channels – Pilgrim's expertise in food service brand and supermarket deli and Hillshire's experience in retail – and complementary product portfolios.

"Our proposal creates considerable value for the shareholders of both Pilgrim's and Hillshire," said Bill Lovette, Pilgrim's CEO, in a statement.  "For Hillshire shareholders, our proposal provides a substantial premium, greater certainty and immediate cash value for their shares. For Pilgrim's, the addition of Hillshire's portfolio of iconic brands and broad based marketing, innovation and distribution expertise will enhance our position as a market leader."

According to a letter sent from Pilgrim's to Sean Connolly, Hillshire's President, the company explains it is "coming forward now because the opportunity for your shareholders to obtain the compelling value represented by our proposal will no longer exist if the proposed acquisition of Pinnacle is consummated."

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