DealBook: Tyson Foods Swoops 1n With Bid for Hillshire

M. Spencer Green/Associated PressHillshire's brands include Hillshire Farm, Jimmy Dean, State Fair and Ball Park.

Tyson Foods swooped in on Thursday and started a bidding war for Hillshire Brands, making a $6.8 billion unsolicited offer for the packaged meat producer that trumps an existing offer from Pilgrim's Pride.

It was just two days ago that Hillshire, the maker of Ball Park hot dogs and Jimmy Dean sausages received an offer from Pilgrim's Pride of $45 per share, valued at $6.4 billion including the assumption of debt.

Tyson said its offer, of $50 per share, values Hillshire at 35 percent above its unaffected stock price earlier this month, before it inadvertently put itself in play by trying to strike a deal of its own. The equity value of the offer is $6.1 billion. Including the assumption of debt, the deal is valued at $6.8 billion.

Earlier this month, Hillshire offered $4.6 billion for Pinnacle Foods, the maker of Vlasic pickles and Birds Eye frozen vegetables, a deal that left analysts scratching their heads.

Now, Hillshire and its shareholders find themselves in the middle of a bidding war between two large rivals.

"We believe that there is a strong strategic, financial and operational rationale for the combination of Tyson and Hillshire," Donnie Smith, the chief executive of Tyson Foods, said in a statement. "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 stand-alone basis or in combination with any other food processing company.

Should Tyson succeed in acquiring Hillshire, it would mean the end of the bid for Pinnacle.

"Our interest is in the company on its own, and not as combined with Pinnacle," Mr. Smith wrote in a letter to Hillshire's chief executive, Sean Connolly. "Accordingly, the termination of the Pinnacle merger agreement would be a condition to our proposed transaction."

Hillshire has known it was a target for some time. A few months before it made its offer for Pinnacle, Pilgrim's Pride privately approached the company about a merger but was rebuffed.

The Tyson offer was set in motion after Hillshire made its bid for Pinnacle, according to a person briefed on the process. Tyson was surprised when Pilgrim's Pride made its own offer this week.

But Tyson, this person said, believes its bid is superior, not only because its premium of 35 percent is large compared with other premiums this year, but also because its offer has no financing contingencies.

Pilgrim's Pride and its majority owner, the Brazilian meatpacking titan JBS, must now decide if they want to enter into a bidding war with Tyson. Pilgrim's Pride did not immediately comment on the Tyson bid.

In the letter to Hillshire's chief executive, Mr. Smith said, "We would have preferred to make this proposal to you privately, but in light of current circumstances we believe that it is in the best interests of your and our shareholders to have current and accurate information about our proposal and the reasons we believe that it is a compelling opportunity for both of our companies."

Tyson is one of the largest producers of chicken, pork and beef, with more than $34 billion in annual revenue. It has a market capitalization of more than $14 billion. Tyson shares were up in premarket trading on news of its bid for Hillshire.

Tyson said there was no financing condition to its offer, and that it had secured a bridge loan to pay for the all-cash deal.

Morgan Stanley and JPMorgan Chase are advising Tyson, and Davis Polk & Wardwell is providing legal advice.

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