In a bidding war that's beginning to resemble the great Jos. A. Bank-Men's Wearhouse saga of 2013, Pilgrim's Pride has taken Tyson Foods' $6.8 billion offer for Hillshire Brands -- a bid that bested Pilgrim's original $6.4 billion offer for the Jimmy Dean maker -- and raised it by nearly $1 billion. Acquisition darling Hillshire, meanwhile, maintains that it cannot break its merger with Pinnacle Foods but says that it is open to discussions with Pilgrim's and Tyson.
Pilgrim's Pride confirmed Tuesday morning that it is now offering $55 per share to acquire Hillshire, a $7.7 billion all-cash transaction that marks a $1.3 billion, or $10 per share increase over Pilgrim's original offer for the company behind Jimmy Dean and Sara Lee. Pilgrim's latest offer also marks a 49% premium over Hillshire's closing price on the day prior to its announcement that it would merge with Pinnacle Foods, the producer of household names like Aunt Jemima, Mrs. Butterworth and Duncan Hines.
It was this $4.2 billion Pinnacle merger that set off the bidding war between chicken companies Pilgrim's Pride and Tyson: even though some analysts estimated that Hillshire could double its frozen food sales by merging with Pinnacle, both Pilgrim's and Tyson think that Hillshire could derive better value from teaming up with one of them. So, Pilgrim's offered $45 per share for Hillshire, which Tyson topped with a $50 per share offer just last week. And now, Pilgrim's has one-upped Tyson with its new $55 per-share offer.
"Pilgrim’s is confident the transaction is strategically and financially compelling, and creates considerable value for the shareholders of both Pilgrim’s and Hillshire," the chicken company said in a statement Tuesday morning, adding that it anticipates annual run-rate cost synergies of $300 million, which will come from operational efficiencies and growth opportunities from higher-margin branded products sold in North America and internationally.
Pilgrim’s has previously said that its proposed Hillshire merger has the support of its majority shareholder, JBS S.A. JBS is a Brazilian meat company -- one of the largest meat companies in the world -- and holds a 75.5% stake in Pilgrim’s.
In response to Pilgrim's latest offer, Hillshire said that its board has authorized separate conversations with Tyson and Pilgrim's Pride, but told both companies, essentially, not to hold their breaths.
"Hillshire Brands does not have the right to terminate the Pinnacle Foods merger agreement on the basis of either of these proposals or enter into an alternative acquisition agreement with either of these parties prior to termination," the company said in a statement Tuesday morning. "There can be no assurance that any transaction will result from these proposals."
Following the confirmation of Pilgrim's upped bid -- which broke Monday night but wasn't officially confirmed until Tuesday morning -- shares of Hillshire predictably surged nearly 9% in Tuesday's pre-market trading session and opened Tuesday's regular trading session at $58.29, a more than 8% gain over Monday's close and $3.29 higher than Pilgrim's latest offer. Pilgrim's Pride, which was unmoved in pre-opening bell action, opened 0.9% down, while Tyson opened with a 2% decline and Pinnacle began the day with an 0.4% uptick.
