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Tyson Foods Inc. has entered the heated bidding war for Hillshire Brands Co., offering $6.8 billion to acquire the Chicago-based company. The offer was made in response to a $6.4 billion dollar proposal made by Pilgrim's Pride just two days ago.
Tyson's offer of $50 dollars per share, which represents a 35 percent premium over Hillshire's closing price as of May 9, 2014, would be a "significant return on [shareholders'] investment, and … a superior alternative to Hillshire’s previously announced agreement to acquire Pinnacle Foods Inc.," Tyson said.
In a letter to Hillshire CEO Sean Connolly, Donnie Smith, Tyson's president/CEO, noted the strong strategic, financial and operational rationale for the prospective merger.
"Our proposal provides Hillshire shareholders with an immediate cash premium for their shares that we believe is both greater and more certain than what can be attained in the near term by the company either on a stand-alone basis or in combination with any other food processing company," he said.
In response to Tyson's unsolicited proposal, Hillshire said: “Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisors, Hillshire Brands’ board will thoroughly review the Tyson Foods proposal.” Approval of the deal with either Tyson or Pilgrim's Pride would result in the termination of Hillshire's pending acquisition of Pinnacle Foods, announced on May 12.
The merger would solidify Tyson as a market leader in prepared foods, the company said, adding to its already vast portfolio a bevy of branded products as well as breakfast options, enabling the company to capitalize on evolving consumer trends within this fast-growing category.
The prospective merger "is a win for our customers and a win for our shareholders," Worth Sparkman, public relations manager for Springdale, Ark.-based Tyson, told Progressive Grocer. "We feel this acquisition aligns with our strategy, which includes continuing to pursue value-added growth and strengthening our position as our customers’ go-to supplier, both in retail and foodservice."
According to Charles Cerankosky, managing director for Cleveland-based Northcoast Research, the onslaught of mergers and acquisitions and the overall trend toward consolidation among retailers and manufacturers in the food industry is likely an effort to achieve scale.
"When you look at companies who have performed well, like Smuckers on the CPG side and Kroger on the retail side, these companies have high evaluation that allow them to use their shares as currency. This is likely a strategy to appeal to a larger customer base," Cerankosky said.
Hillshire could not be immediately reached on Thursday regarding the offer.