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This Monday, Feb. 7, 2011, file photo shows Hillshire Farm products at Quality Market in Barre, Vt. (Toby Talbot/AP)
This Monday, Feb. 7, 2011, file photo shows Hillshire Farm products at Quality Market in Barre, Vt. (Toby Talbot/AP)

Tyson trumps Pilgrim's offer to buy Hillshire Brands Add to ...

Meat processor Tyson Foods Inc. has offered to buy Hillshire Brands Co. for $6.13-billion (U.S.), trumping a bid from Pilgrim’s Pride Corp., as it looks to expand into the fast-growing market for branded breakfast foods.

Tyson offered $50 per share for the maker of Ball Park hotdogs and Jimmy Dean Sausages, $5 more than Pilgrim’s bid.

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Hillshire’s shares were trading at $52.37 on Thursday morning, suggesting some investors were expecting Tyson’s overture to trigger a bidding war.

Shares of Tyson, the largest U.S. meat processor, were up 7 per cent.

Tyson, which mainly offers private label products, said the deal would help it diversify into branded products, an area where Hilshire is strong.

“You look at our Tyson Foods prepared foods business and it’s about 86 per cent private label. You look at Hillshire’s business and it’s about 89 per cent branded,” a company executive said on a conference call. “The power of combining those together is just phenomenal.”

Tyson said the total value of the deal was $6.8-billion.

Based on Hillshire’s nearly 123 million shares outstanding as of March 29, the company is valued at $6.13-billion, according to Reuters calculations. Hillshire has long-term debt of $840-million, according to its latest quarterly filing.

Pilgrim’s Pride offered on Tuesday to buy Hillshire in an all-cash deal that valued the company at $5.5-billion based on the same number of shares. Its total offer was $6.4-billion.

Hillshire itself offered this month to buy Pinnacle Foods Inc., a deal that could be in peril after the proposals from Pilgrim’s and Tyson.

Tyson said on Thursday that its offer would stand only if Hillshire terminated its deal with Pinnacle, the maker of Birds Eye frozen vegetables and Duncan Hines cake mixes.

Hillshire was not immediately available for comment.

Tyson reported weaker-than-expected quarterly profit earlier this month as consumers shun beef products, prices of which have skyrocketed due to rising feed costs and shortage of cattle in the United States. It was also hit by weak sales in China.

Tyson said it had secured financing from Morgan Stanley Senior Funding Inc. for the deal.

The company said it expected the proposed deal to add to its earnings per share in the first year after completion.

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