News Column

Pilgrim's Pride makes offer to buy Hillshire Brands

May 27, 2014

By Jessica Wohl, Chicago Tribune



May 27--Poultry producer Pilgrim's Pride Corp. said it offered to buy Chicago-based packaged food company Hillshire Brands Co. in a deal valued at nearly $5.7 billion plus debt, the latest shakeup in the food industry.

The $45-per-share cash offer represents a premium of about 22 percent to Hillshire's closing stock price on Friday.

Shares of Hillshire were trading up 21.4 percent at $44.96 on Tuesday morning, hovering just below the offer price. Pilgrim's Pride shares were up 5.8 percent at $26.55.

Shares of Pinnacle Foods, which Hillshire offered to buy on May 12, plunged 6 percent to $31.30. In order for Pilgrim's Pride to acquire Hillshire, Pilgrim's Pride has offered to pay the $163 million termination fee Hillshire would owe Pinnacle to break off that pending deal.

Hillshire, created after conglomerate Sara Lee spun off its European coffee and tea business in 2012, has long been seen by Wall Street as a potential acquisition candidate. The company, known for products such as Jimmy Dean sausage and Ball Park hot dogs, has been beefing up with its own acquisitions as well.

An acquisition of Hillshire would allow Pilgrim's Pride to expand its business in branded foods. Right now, 80 percent of Pilgrim's Pride's sales are in fresh poultry and 20 percent of its sales are in prepared foods.

"For Hillshire shareholders, our proposal provides a substantial premium, greater certainty and immediate cash value for their shares," said Bill Lovette, Pilgrim's chief executive officer. "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."

Representatives for Hillshire could not be immediately reached for comment on Tuesday morning.

Lovette said that he discussed an offer with Hillshire during a visit to Chicago in February, adding that it would make Chicago a "major center of North American operations."

Hillshire, under CEO Sean Connolly, has been trying to transform itself into a company with a broader portfolio of meat and other foods. Earlier this month, Hillshire said it planned to buy Pinnacle Foods Inc., maker of Birds Eye vegetables and Vlasic pickles, for about $4.3 billion in cash and stock, plus the assumption of nearly $2.4 billion in debt.

Pilgrim said its offer for Hillshire had the support of Brazilian meat processor JBS S.A., which owns about 68 percent of the company. JBS is the world's largest integrated meats producer.

In addition to the $45 per share Pilgrim is offering for Hillshire, implying a value of roughly $5.67 billion, and assume $553 million in net debt, Pilgrim's Pride would also pay the $163 million termination fee that Hillshire would have to pay to break off its deal with Pinnacle. In total, that gives the deal an enterprise value of roughly $6.39 billion.

Pilgrim's said it expects to finance the deal with existing cash and third party financing.

The proposed deal comes after several changes in the food industry. Among them, in early May Mondelez International announced a restructuring and said it plans to combine its coffee business with D.E. Master Blenders 1753 B.V. Hillshire announced its proposal to buy Pinnacle Foods on May 12.

jwohl@tribune.com

Follow @JessicaWohl Follow @chibreakingbiz

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Source: Chicago Tribune (IL)


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