The proposal, which is contingent on Hillshire terminating its definitive agreement to acquire
Tyson's offer represents a 69% premium over Hillshire's stock price on
Fitch expects to resolve the Rating Watch Evolving on Hillshire's ratings upon further clarity on its agreement with Pinnacle and potential acquisition by Tyson. A Hillshire/Pinnacle combination could result in an additional downgrade. However, based on Fitch's parent-subsidiary linkage criteria, upside exists for Hillshire's ratings if it is acquired by Tyson. Tyson's offer will remain in effect until the earlier of the termination of Hillshire's agreement with Pinnacle or
Future developments that may lead to a positive rating action include:
--A definitive agreement to be acquired by Tyson, which is rated 'BBB'/Stable Outlook, given Fitch's parent-subsidiary linkage criteria.
Future developments that may lead to a downgrade to 'BB-' include:
--Hillshire remaining independent and proceeding with the acquisition of Pinnacle, as currently proposed;
--Fitch's analysis of its final projections under a Hillshire/Pinnacle transaction that results in total debt-to-operating EBITDA remaining at or above the 4.5x range within 18-24 months of transaction closing due to the lack of sufficient free cash flow to achieve lower leverage.
Fitch currently rates Hillshire as follows:
--Long-term IDR 'BB';
--Senior unsecured notes 'BB';
--Bank credit facility 'BB';
--Short-term IDR 'B';
--Commercial paper 'B'.
The Rating Watch is Evolving. At
Additional information is available at 'www.fitchratings.com'
--'Corporate Rating Methodology' (
--Parent and Subsidiary Rating Linkage
--Fitch's Approach to Rating Entities within a Corporate Group Structure (
--Fitch: Meat Processor Growth Needs Drive Hillshire Bidding War (
--Fitch Affirms Tyson's Ratings on Offer to Buy Hillshire; Outlook Revised to Stable (
--Fitch Revises Rating Watch on Hillshire's Ratings to Evolving After Takeover Bids (
--Fitch Downgrades Hillshire to 'BB' on Acquisition Announcement; Places Ratings on Negative Watch (
--Fitch Views Pilgrim's Pride Takeover Bid for Hillshire as Neutral to JBS' Credit Quality (
--Fitch Upgrades Tyson's S-T IDR to 'F2' and Affirms L-T IDR at BBB; Outlook Positive (
Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage
Parent and Subsidiary Rating Linkage
Fitch's Approach to Rating Entities within a Corporate Group Structure
Source: Fitch Ratings
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