US chicken producer Pilgrim's Pride to buy Hillshire Brands for $6.4 bn
28 May 2014
Pilgrim's Pride Corp, the world's second-largest chicken producer, yesterday struck a deal to buy packaged food company Hillshire Brands Co, for $6.4 billion in cash.
Pilgrim's Pride, which has also agreed to take on Hillshire's long-term debt of about $840 million, has offered to pay $45 per share, a 22 per cent premium to Hillshire's closing price on 23 May.
The deal comes two weeks after Hillshire, a 2012 spin-off from Sara Lee, agreed to buy Pinnacle Foods Inc from private equity firm Blackstone Group, in a $4.3-billion cash and stock deal. Including debt, the transaction is valued at $6.6 billion. (See: Sara Lee spinoff Hillshire to buy Pinnacle Foods from Blackstone for $6.6-bn)
Pilgrim's offer requires Hillshire to abandon its Pinnacle bid, for which Pilgrim is prepared to pay the $163-million termination fee to Pinnacle.
Hillshire said it would review Pilgrim's proposal but added that it still believes in the strategic merits to buy Pinnacle Foods.
''We continue to strongly believe in the strategic merits and value creation potential provided by the proposed transaction with Pinnacle Foods. Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisors, Hillshire Brands' Board will thoroughly review the Pilgrim's Pride proposal.''
Pilgrim, based in Colorado, said that its all-cash proposal provides Hillshire shareholders with a substantially superior alternative to Hillshire's pending acquisition of Pinnacle Foods and the transaction has the support of Pilgrim's board, as well as Brazilian meatpacking company JBS S.A, the majority owner of Pilgrim's with a 75.5 per cent stake.
"For Hillshire shareholders, our proposal provides a substantial premium, greater certainty and immediate cash value for their shares. 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,'' said, Bill Lovette, CEO of Pilgrim's.
''With our complementary products, we believe that together Pilgrim's and Hillshire will better serve our combined customer bases for the benefit of all our stakeholders,'' he added.
Illionois-based Hillshire Brands, whose portfolio includes Jimmy Dean, Hillshire Farm, Birds Eye, Ball Park, Duncan Hines, Vlasic, Wish-Bone, State Fair, Sara Lee frozen bakery, Mrs. Butterworth's and Log Cabin, among others, was spun off from Sara Lee Corp in 2012.
The company generated approximately $4 billion in annual sales in 2013 and has more than 9,000 employees.
Pilgrim's, a supplier of Kentucky Fried Chicken, is the second-largest chicken producer in the world, with operations in the US, Mexico and Puerto Rico.
Pilgrim's is ranked among the world's largest protein companies, with sales of $8.4 billion in fiscal 2013.
Employing 38,000 people, the company has the capacity to process more than 36 million birds per week or more than 9.5 billion pounds of live chicken annually.
