Tyson Wants to Eat Hillshire Brands for Breakfast

Submits unilaterally binding offer, with morning day-part in strategic crosshairs

Published in CSP Daily News

Tyson Hillshire (CSP Daily News / Convenience Stores / Foodservice)

SPRINGDALE, Ark. -- Tyson Foods Inc. has announced it has submitted a unilaterally binding offer to acquire all outstanding shares of The Hillshire Brands Co. for $63 per share in cash. The all-cash transaction is valued at approximately $8.55 billion, including Hillshire Brands' outstanding net debt, and represents a multiple of 16.7x trailing 12 months adjusted EBITDA or 10.5x including $300 million in synergies.

The offer is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods Inc. in accordance with the terms of that deal. It follows a bidding process conducted by Hillshire Brands that concluded on June 8, 2014.

The Hillshire Brands board has not approved the Tyson Foods offer, has not changed its recommendation regarding the Pinnacle merger and is not making any recommendation with respect to the Tyson offer, Chicago-based Hillshire Brands announced.

Hillshire Brands does not have the right to terminate the merger agreement with Pinnacle Foods on the basis of the Tyson Foods offer or enter into an agreement with Tyson Foods prior to its termination. There can be no assurance that any transaction will result from the Tyson Foods offer, it said.

Following Tyson's announcement regarding Hillshire, Greeley, Colo.-based Pilgrim's Pride Corp. announced that it has withdrawn its proposal to acquire Hillshire.

"As a disciplined acquirer, we determined that it was in the best interests of our shareholders not to increase our proposed price of $55 per share in cash," said Bill Lovette, Pilgrim's CEO. "Pilgrim's will maintain its strong focus on operational excellence and shareholder value, while pursuing acquisition opportunities that advance our stated strategy."

"The Hillshire Brands acquisition would represent a defining moment for Tyson Foods," said Donnie Smith, Tyson's president and CEO. "Our strategy has been to grow our prepared foods business, and it has been our aspiration to be a leader in retail prepared foods just as we are in chicken. Now we will have those iconic No. 1 and No. 2 brands in numerous categories."

The combination of Tyson and Hillshire Brands would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands, including Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm. In particular, the strength of Hillshire Brands' products in the breakfast category would allow Tyson to capture opportunities in this attractive and fast-growing day-part.

"After a disciplined process to identify ways of growing our Prepared Foods segment, we are convinced that combining Tyson and Hillshire Brands would make strategic, financial and operational sense and would stabilize earnings by increasing return on sales and de-commoditizing our business," Smith said.

The offer will remain in effect until Dec. 12, 2014, the final termination date of the Hillshire Brands/Pinnacle Foods agreement. If that agreement is terminated in accordance with its terms, Hillshire Brands would be able to accept the offer, with the result that binding definitive agreements could become effective. Any transaction would be subject to regulatory approval and other customary closing conditions.

Hillshire Brands is a leader in branded, convenient foods. The company generated approximately $4 billion in annual sales in fiscal 2013, has more than 9,000 employees, and is based in Chicago. Hillshire Brands' portfolio includes iconic brands such as Jimmy Dean, Ball Park, Hillshire Farm, State Fair, Sara Lee frozen bakery and Chef Pierre pies, as well as artisanal brands Aidells, Gallo Salame and Golden Island premium jerky.

Tyson Foods, with headquarters in Springdale, Ark., is one of the world's largest processors and marketers of chicken, beef and pork. It produces a variety of protein-based and prepared food products and is the recognized market leader in the retail and foodservice markets it serves.