Pinnacle Foods Inc. (PF) said Monday that it has exercised its right to terminate the merger agreement between the company and The Hillshire Brands Co. (HSH) announced on May 12.
Pursuant to the terms of the merger agreement, Pinnacle is entitled to receive a cash payment of $163 million from Hillshire Brands as breakup fee. Pinnacle indicated that one-time fees and expenses associated with the merger agreement, including external advisors and employee incentives, are expected to total about $25 million.
Given the company's sizable net operating loss carry-forwards, Pinnacle expects to pay minimal cash taxes on the payment from Hillshire. The company plans to use the net cash proceeds to reduce debt and, as a result, expects net interest expense for the year to fall slightly below the $100 million previously disclosed. The interest savings are expected to be reinvested in the business this year.
Pinnacle also reaffirmed its 2014 adjusted earnings guidance of $1.70 to $1.75 per share.
The termination of the Pinnacle merger agreement clears the way for Tyson Foods Inc. (TSN) to complete its $8.55 billion takeover of Hillshire. Tyson's offer was subject to Hillshire being released from its existing deal to acquire Pinnacle. Tyson had demanded that Hillshire scrap its accord with Pinnacle. Hillshire withdrew its recommendation for the Pinnacle merger on June 16.
On June 9, Pilgrim's Pride Corp. (PPC) withdrew its $55.00 per share in cash offer to acquire Hillshire following announcement by Tyson that it has submitted a unilaterally binding offer to acquire all outstanding shares of Hillshire for a price of $63 per share in cash.
Pinnacle shares closed MOnday's regular trading session at $32.90, down 2 cents, while Hillshire shares closed closed the day's session at $62.30, up 30 cents.
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