Pilgrim’s Pride Opts for Hillshire

Pilgrim’s Pride one of the largest poultry producing companies in the world has offered to purchase Hillshire Brands for a bid of 6.4 billion dollars. This bid would be purchasing Hillshire Brands at a premium price of roughly 45 dollars per share and would undermine Hillshire’s recent bid to purchase Pinnacle Foods to create one of the US’s biggest meat producer.

The Food and Grocery Industry

The food and grocery industry is currently in a major food fight. While images of food being thrown around a cafeteria may come to mind, these major brands are in battle with each other when it comes to producing their products for a better price point and gaining an advantage over each other. In recent weeks there has been an outbreak in activity among many of the food producing giants. Mondelez and DE Master Blenders 1753 have agreed to jointly fund and produce a global coffee company projecting annual revenues upwards of 7 billion. The Japanese Mizkan Group has paid 2.15 billion dollars in a sweeping move to buy Unilever’s North American pasta sauce business. With all of this constant activity, the move on Hillshire Brands is nothing new but would reshape the face of meat producers in the U.S.

Hillshire Looking to Purchase Pinnacle Foods

Less than two weeks ago, Hillshire Brands announced their bid to purchase Pinnacle foods, best known for their Duncan Hines brand, Vlasic Pickles brand, and Birds Eye Brand. Hillshire is best known as the parent company behind Jimmy Dean and Sara Lee foods. Originally Hillshire had bid to buy Pinnacle Foods when it announced it would pay up to 4.2 billion dollars. The acquisition of Pinnacle Foods would combine two of the largest U.S. breakfast producers. As of yesterday Pilgrim’s Pride has thrown their hat in the ring looking to disrupt the Hillshire Brands planned purchase and kill one of the greatest merger’s that might have been.

Purchasing Hillshire

The Chicago based Hillshire Brands released a statement yesterday saying it would thoroughly review the proposal made by Pilgrim’s Pride. The deal to purchase Hillshire Brands is contingent on Hillshire dropping its current bid on Pinnacle Foods. The company also has put up 163 million dollars in addition to their 6.4 billion dollar bid, in order to cover the costs of the termination of the deal in the making between Hillshire and Pinnacle. In a statement yesterday morning, Pilgrim’s CEO Bill Lovette said: “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.” Hillshire is the parent company to such brands as Ball Park, State Fair, Jimmy Dean, Hillshire Farm Meats, and Sara Lee products.

Following the announcement of Pilgrim’s bid to acquire Hillshire, shares of Pilgrim’s Pride jumped 3%. Hillshire surged upwards of 21% and shares of Pinnacle Foods dropped by nearly 7%. If the deal is to go through, then it would create a company merger with a combined annual revenue of 12 billion dollars. It would also give the world’s largest meatpacking company JBS a further reach into the U.S. market. JBS has a 68% stake in Pilgrim’s Pride and is helping to finance the purchase.

Will Pilgrim’s Pride Override Hillshire’s Bid?

Many are wondering if the bid for Hillshire by Pilgrim’s Pride will override the purchase bid made by Hillshire for Pinnacle Foods in the last two weeks. Many seasoned investors and experts agree that the Hillshire Board may be more inclined to accept the purchase bid made by Pilgrim’s Pride due to the much more attractive option being presented. Many would also agree that the stability that would be provided for the Hillshire Brands family during this massive food fight could be better achieved by the JBS and Pilgrim’s Pride financial and distributive power and reach. Last month Hillshire purchased Van’s Natural Foods for 165 million dollars, the maker of gluten free products. This past September Hillshire also purchased a gourmet jerky producer Golden Island for a whopping 35 million dollars.

Should the deal go through, it is expected that all final revisions would be made and agreed to by the end of the third quarter of this year. Pilgrim’s Pride released a financial statement saying that the deal would be financed by third party cash as well as existing cash within the Pilgrim’s Pride’s acquisition coffers. Currently Pilgrim’s is being advised by a plethora of companies that include Swaine & Moore and Lazard and Cravath. Hillshire is currently under the financial advisement of Goldman Sachs and Skadden among others. Depending on how the Board of Hillshire Brands responds to the offer of Pilgrim’s Pride to purchase the company will help both current and future investors better understand how to invest in the future of both companies.

Stay informed about the latest on investment information by getting on our FREE eMail list!

The post Pilgrim’s Pride Opts for Hillshire appeared first on StockRockandRoll.