Home » Tyson Wants Hillshire, Deal Contingent Upon Termination Of Pinnacle Merger

Tyson Wants Hillshire, Deal Contingent Upon Termination Of Pinnacle Merger

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Last updated on May 30th, 2014 at 03:47 pm

Just more than two weeks after Hillshire Brands announced that it had entered into a definitive agreement to purchase Pinnacle Foods Inc. in a $6.6 billion deal, Tyson Foods said Thursday that it hopes to buy Hillshire in a $50-per-share cash transaction valued at $6.8 billion. Springdale, Ark.-based Tyson says its proposal represents a “superior alternative” to Hillshire’s agreement to acquire Pinnacle.

According to Tyson, the proposal would provide Hillshire shareholders with an immediate and significant return on their investment in Hillshire. Tyson says its proposed price represents a 35 percent premium to the unaffected closing price per share of the company’s common stock May 9, the day prior to the announcement of Hillshire’s proposed agreement to acquire Pinnacle. At a total value of $6.8 billion, the Tyson proposal represents a multiple of 13.4 times Hillshire’s trailing LTM adjusted EBITDA, the company says.

According to Tyson:

• The combination of Tyson and Hillshire would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands and private label products, including Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm. In particular, the company says it believes that the strength of Hillshire’s products in the breakfast category would allow Tyson to capture opportunities from shifting consumer trends in this attractive and fast-growing daypart where Tyson has little presence today.

• The transaction provides Tyson with the chance to realize significant synergies through the combination of the two companies’ sales and marketing teams, significant distribution and supply chain resources and alignment of shared service functions.

• Tyson will realize substantial benefits from full integration of the protein value chain, as stable and consistent demand for protein products will enable Tyson to best utilize its industry-leading position and resources to maximize shareholder value.

• Tyson expects that the proposed transaction would be accretive to EPS in the first full year after completion.

“We believe that there is a strong strategic, financial and operational rationale for the combination of Tyson and Hillshire,” said Donnie Smith, Tyson Foods president and CEO. “Our proposal provides Hillshire shareholders with an immediate cash premium for their shares that we believe is both greater and more certain than what can be attained in the near term by the company either on a standalone basis or in combination with any other food processing company.

“Tyson’s shareholders will benefit from the considerable new opportunities that come with this extraordinary strategic fit,” he added. “We stand ready to work together with Hillshire’s leadership to quickly reach an acceptable definitive merger agreement, and look forward to being able to welcome Hillshire’s communities, employees and business partners to the Tyson family.”

There is no financing condition to the proposal, as Tyson has secured a fully committed bridge facility from Morgan Stanley Senior Funding Inc., which Tyson says it expects will be joined by JP Morgan Securities LLC in the near future. This proposal has the unanimous support of the Tyson board of directors and is subject to the termination of Hillshire’s merger agreement with Pinnacle.

Morgan Stanley and JP Morgan are acting as financial advisors to Tyson and Davis Polk & Wardwell LLP is acting as its legal counsel.

Go here to see the text of the letter that was sent from Tyson’s Smith on Thursday to Sean M. Connolly, Hillshire’s president and CEO.

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