Tyson Foods, Inc. (NYSE:TSN) formally struck a deal on Wednesday to buy Hillshire Brands Co (NYSE:HSH) for $7.7 billion, capping a drawn-out bidding war.
As part of the deal, Hillshire Brands Co (NYSE:HSH)’s Jimmy Dean sausages, Ball Park hot dogs and other products would come under the ambit of Tyson Foods, Inc.
Tyson Foods’ conditional offer
In June, Tyson Foods, Inc. (NYSE:TSN) prevailed over Pilgrim’s Pride Corporation by offering to buy Hillshire Brands Co for $8.55 billion including debt. Earlier, poultry producer Pilgrim Pride offered to purchase Hillshire Brands Co for $45 per share in a $6.4 billion cash to acquire wider product diversification in the grocery area.
Earlier in May, it was reported that Pinnacle Foods Inc (NYSE:PF) was going to be acquired by Hillshire Brands Co in a $6.6 billion deal that included outstanding debt. Thus these developments turned Hillshire from hunter to hunted.
Consequent to conclusion of bidding process in June, Tyson Foods, Inc. (NYSE:TSN) made the conditional offer. The offer was to remain conditional on the Pinnacle deal being called off.
Tyson Foods’ 70% premium offer
Springdale, Ark-based Tyson Foods won the auction for Hillshire with its offer of $63 a share, representing a 70% premium to Hillshire Brands Co (NYSE:HSH)’s valuation before the bidding process began.
According to Anna Prior of The Wall Street Journal, Tyson Foods ended up offering hundreds of millions of dollars more than necessary to beat the next-best offer due to the secretive nature of the auction process. Pilgrim’s Pride Corporation (NASDAQ:PPC) stuck with its bid of $55 a share, indicating Tyson Foods, Inc. (NYSE:TSN) could have secured Hillshire with an offer of about $57.50.
Hillshire’s Jimmy Dean brand dominates refrigerated breakfast sausage sales with nearly one-third of the market. The proposed deal would strengthen Tyson Foods financials as the packaged meat generally carry higher profit margins than the meat Tyson Foods sells to restaurants and food-service operations, which accounts for a substantial portion of the company’s sales.
Following Hillshire Brands Co (NYSE:HSH) officially cancelling its own $4.3 billion deal to buy Pinnacle Foods, the latest deal between Tyson and Hillshire was reached.
The proposed deal is expected to close by Sep 27. Tyson Foods, Inc. (NYSE:TSN) will pay Pinnacle a $163 million breakup fee on behalf of Hillshire.