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
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 email@example.com
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