Tyson Closer To Buying Hillshire As Pilgrim's Pride Withdraws Bid - Update

(RTTNews) - Meat producer Tyson Foods' (TSN) chances of acquiring Hillshire Brands (HSH) brightened after rival bidder Pilgrim's Pride (PPC) on Monday withdrew its $55-per-share offer for the maker of Jimmy Dean sausages and Ball Park hot dogs. The move comes after Tyson, earlier in the day, sweetened its bid for Hillshire to $63 a share, valuing the offer at about $8.55 billion, including debt.

"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 chief executive officer.

"Pilgrim's will maintain its strong focus on operational excellence and shareholder value, while pursuing acquisition opportunities that advance our stated strategy...," Lovette added.

Meanwhile Hillshire hasn't made any recommendation on the Tyson offer nor changed its agreement to buy Pinnacle Foods (PF) for $6.6 billion, which has been a sticking point for Tyson.

Both Pilgrim's and Tyson had insisted that Hillshire abandon the Pinnacle deal, in which case Hillshire will have to pay a termination fee of $163 million to Pinnacle.

Hillshire first made news on May 27, when Pilgrim's, a unit of Brazilian meat giant JBS SA, made an unsolicited bid to buy Hillshire for $45 per share in cash. Tyson soon proposed to acquire Hillshire for $50 per share, and on June 1, Pilgrim's raised its offer to $55 per share. Hillshire had offered to have separate talks with the companies to discuss the bids.

For Tyson, a merger will help reposition it as a key player in the retail sale of prepared foods, with a portfolio of well-recognized brands, as well as reap annual synergies of over $300 million.

Tyson's appetite for Chicago-based Hillshire reflects a penchant to gain consumer brands that offer bigger margins compared with slaughtering livestock.

Tyson also expects the proposed deal to be marginally accretive to earnings-per-share on a cash basis in the first full fiscal year after completion and substantially accretive thereafter.

Hillshire Brands stock is trading at $61.83, up $2.92 or 4.95%, on a volume of 26 million shares on the NYSE.

Pilgrim's Pride stock moved down $1.52 or 5.79%, trading at $24.75, on a volume of 1.2 million shares on the Nasdaq.

Tyson Foods stock is trading at $38.05, down $2.07 or 5.16%, on a volume of 5.5 million shares on the NYSE.