DJ Pilgrim’s Pride Offers to Buy Hillshire — 2nd Update 5/27/14

DJ Pilgrim’s Pride Offers to Buy Hillshire — 2nd Update


By Ben Fox Rubin

Pilgrim’s Pride Corp. unveiled an offer to acquire fellow food producer

Hillshire Brands Co. for roughly $5.5 billion, complicating a planned deal

between Hillshire and Pinnacle Foods Inc.

Pilgrim’s Pride, a chicken producer, said it is offering $45 a share in

cash for Hillshire, a 22% premium over Friday’s closing price. The company said

the deal is valued at $6.4 billion, which may include the assumption of debt.

Representatives from Hillshire and Pinnacle weren’t immediately available

for comment.

Hillshire shares jumped about 23% premarket, rising above the offer price.

The offer comes about two weeks after Hillshire agreed to buy Pinnacle

Foods for $4.3 billion. That deal is expected to create a company with about

$6.6 billion in annual revenue and bring together Hillshire’s namesake lunch

meats, Jimmy Dean sausages and Sara Lee frozen desserts with Pinnacle’s Vlasic

pickles, Wish-Bone salad dressings and Birds Eye frozen vegetables.

Pilgrim’s said its offer is superior to the Pinnacle deal. The company

added it expects the proposed transaction would close in the third quarter,

subject to the termination of the Hillshire-Pinnacle tie-up, which carries a

$163 million breakup fee.

“We are coming forward now because the opportunity for your shareholders to

obtain the compelling value represented by our proposal will no longer exist if

the proposed acquisition of Pinnacle is consummated,” Pilgrim’s Chief Executive

Bill Lovette wrote in a letter to his counterpart at Hillshire.

Deal making in the food sector has surged in the past two years as

companies contend with a menu of stubborn challenges. The growing clout of giant

retailers in the grocery business, especially Wal-Mart Stores Inc., has crimped

the pricing power of packaged-food producers.

Hillshire, which was formerly known as Sara Lee Corp., spun off its coffee

and tea business in 2012 to focus more on U.S. food sales, renaming itself in

the process. Its sales have been relatively flat in recent years.

The Pinnacle deal, expected to close by September, would be Hillshire’s

biggest since the spinoff.

For its part, Pilgrim’s Pride, the second-largest U.S. chicken processor by

sales after Tyson Foods Inc., had already indicated it was on the deals hunt

amid the recent fluffy of deals in the sector.

Mr. Lovette told analysts on a conference call earlier this month that the

company was looking at a number of acquisitions and could take on more debt to

complete a large deal.

Analysts have said Pilgrim’s, majority-owned by Brazilian meatpacker JBS

SA, has the ability to absorb a smaller poultry player or potentially broaden

its portfolio of products by taking on a company specialized in a certain

segment, such as frozen foods. The Greeley, Colo., company is riding a wave of

strong demand for chicken as consumers increasingly turn away from pricier meats

like beef, and the cost to feed its chickens has dropped thanks to a record U.S.

corn harvest last year.

Write to Ben Fox Rubin at


Subscribe to WSJ:


(END) Dow Jones Newswires

05-27-14 0748ET

Copyright (c) 2014 Dow Jones & Company, Inc.


Chain Link: [CS20140527001029]


[Related Stories]


This entry was posted in Agriculture, Daily Dispatch, Daily Market Commentaries, Daily Market News, Livestock, Research. Bookmark the permalink.

Leave a Reply