It has recently become known that Hillshire Brands is on the market looking for a new home. Pilgrim’s Pride had previously put in a bid for $6.4 billion, but they have seemed to have been usurped by Tyson Foods. They have put in a bid at $6.8 billion with a pledge to pay $50 cash per share. This represents an 11% premium on the offer Pilgrim’s Pride had submitted. Investors have been anticipating that Hillshire Brands would seduce a large offer. The company’s stock has risen an impressive 17% as investors are looking to cash in on a nice pay day.
Most will be surprised if the deal ends with Tyson’s offer. Brazilian food processor, JBS, owns roughly 75% of Pilgrim’s Pride and will most likely back their subsidiary if lack of cash becomes an issue. Some speculate that these bids have come due to Hillshire’s recent interest in acquiring Pinnacle Foods, and buying out the company would be one way to stomp that out. The value seen in Hillshire comes in hand with high chicken prices combined with cheap corn feed costs. As animal based protein prices continue to soar, Hillshire is literally a cash cow.
In a statement Tyson Chief Executive Donald Smith said “We believe that there is a strong strategic, financial and operational rationale for the combination of Tyson and Hillshire.” Hillshire has only been an independent company since 2012 when it split from Sara Lee. Brokers on Wall Street have always believed it was just a matter of time until bigger companies eyed the prosperous meat supplier.
JPMorgan Chase has already announced that it believes that a deal with Pilgrim’s Pride would ultimately fair better for shareholders and the companies involved. Pilgrim’s Pride has only offered $45 cash per share though, falling $5 less than Tyson’s offer. In a letter to to Hillshire chief executive, Sean M. Connolly, Mr. Smith made it clear that the interest in Hillshire comes in the form of the company alone and not with Hillshire’s prospective purchase of Pinnacle Foods. Regardless of what ends of happening, companies like Tyson and Pilgrim’s Pride supply most of the food in this country anyways. We would like these companies to start focusing on quality over quantity, and food over profits.
Paul Sakuma/AP/File
Comment Template