Pilgrim's Pride Ups Bid for Hillshire
As the bidding war continues for the Hillshire Brands Co., Pilgrim's Pride upped the ante yesterday with an offer of $55 per share, in a transaction valued at $7.7 billion, topping Tyson Foods' bid of $50 per share, or $6.8 billion, made last week.
The revised proposal represents a $1.3 billion increase over Pilgrim's initial offer of $6.4 billion, or $45 dollars per share, and a 49 percent premium over Hillshire's share price, as of one day prior to the Pinnacle Foods acquisition announcement on May 12.
"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 poultry producer said in a statement, adding that it expects run-rate costs synergies in excess of $300 million annually, stemming from operational and value-chain efficiencies, as well as growth opportunities in higher-margin branded products, both in North America and abroad.
Yesterday, Hillshire released a statement regarding the unsolicited proposals, indicating it would conduct separate discussions with both Pilgrim's Pride and Tyson as the Chicago-based company weighs its options.
Approval of a deal with either company would derail Hillshire's acquisition of Pinnacle, which some investors and analysts have criticized as "spreading the food maker's portfolio of products too thin," The New York Times reported, in addition to taking on $2.3 billion in debt.
The continued battle for Hillshire represents the ongoing industry trend toward consolidation, as manufacturers fight for share in an evolving and segmented market place, Charles Cerankosky, managing director for Cleveland-based Northcoast Research, told PG. "Both Pilgrim and Tyson are motivated buyers and see a high value in Hillshire's assets. So this becomes a battle of the balance sheets or, perhaps, one of debt capacity," he said.
At press time, Pilgrim's Pride declined further comment, and Tyson Foods did not say whether it would respond with a higher bid.