5.27.2014

Hunger Games (Pilgrim's Pride + Hillshire Brands)



Food Fight: Pilgrim's Pride Wants Hillshire To Dump Pinnacle Foods And Join Forces

Excerpt:


Is the merger of breakfast giants soon to be the merger that wasn’t? Barely two weeks after Hillshire Brands HSH +21.66%, the maker of Jimmy Dean and Sara Lee foods, announced that it would pay $4.2 billion to acquire Aunt Jemima maker Pinnacle Foods, a third food producer has thrown its hat into the ring. Pilgrim’s Pride, a Colorado-based chicken company, said Tuesday that it wants to acquire Hillshire for more than $6 billion — but only if Hillshire ditches its deal with Pinnacle. Pilgrim’s Pride announced Tuesday morning that it wants to acquire Hillshire Brands for $45 per share in cash, or a total of $6.4 billion. The offer marks a 25% premium to Hillshire’s weighted average price in the ten days following the announcement of the Pinnacle merger. Pilgrim’s also said that it would cover the $163 million break-up fee that Hillshire would owe Pinnacle, and that a Pilgrim’s-Hillshire partnership would have a combined revenue of $12.4 billion and combined EBITDA of $1.4 billion. “We have long respected the Hillshire business and we are confident that Hillshire’s Board and shareholders will find our all-cash premium proposal to be superior to the pending acquisition of Pinnacle,” Pilgrim’s CEO Bill Lovette said in a statement Tuesday morning, calling the deal considerably valuable for both Pilgrim’s and Hillshire shareholders. ”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.” Among the brands that Hillshire holds: Ball Park, State Fair (both of hot-dog-making fame), Hillshire Farm, Jimmy Dean and Sara Lee. In a conference call with investors, Lovette said that Pilgrim’s merger with these brands would create a “fully integrated protein leader.” He also said that he believes that the deal could be consummated “very quickly,” as early as the third quarter of 2014.
Comment: Image source. Tempted to sell (but resisting) HSH because it is up by $ 8. But would be short term gain. Meanwhile - on the pros and cons of the Hillshire Pinnacle deal

3 comments:

  1. Pinnacle will receive a breakup fee if Hillshire deal fails.

    Even if Hillshire deal is dashed, Pinnacle Foods remains appetizing:

    Pinnacle would collect a nice cash consolation prize, as its agreement with Hillshire explicitly included a higher breakup fee if the merger were dropped because Hillshire itself became takeover quarry. The $163 million breakup fee in this scenario is roughly equal to Pinnacle’s 2013 net income.

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  2. Now Tyson bidding on Hillshire:

    Hillshire Brands (HSH) is popping again as an M&A meat tsunami is still gaining strength. Yesterday Pilgrim's Pride was taking a gander at the company, but now Tyson Food is jumping into the fray, upping the bid put out by Pilgrims by $5 to $50/share, or $6.8 Billion. Keep in mind that as of last weekend Hillshire was thinking of itself as the hunter, having put in a $4.6 billion bid for Pinnacle Foods. Now out of no where Hillshire is subject to a bidding war. It's awesome theater

    Personal connection: I bought 100 HSH last July at about $ 35 ... now at $ 52.

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