Hillshire Brands has entered into formal talks with Tyson Foods and Pilgrim's Pride, which have both made unsolicited offers to the Jimmy Dean sausage maker, which is itself negotiating a deal to merge with Pinnacle Foods.
In a statement, Hillshire Brands said it would “provide information to, and conduct separate discussions with” each suitor, and acknowledged that the proposals from both firms are “conditioned on the termination of the Pinnacle Foods merger agreement”.
It added: “The Hillshire Brands Board of Directors is not withdrawing, modifying, withholding or qualifying its recommendation with respect to the Pinnacle merger agreement and the merger, or proposing to do so, and is not making any recommendation with respect to either the Pilgrim's Pride or Tyson Foods proposals.”
The Pilgrim's Pride offer for Hillshire was originally pitched at $45.00 per share in cash, and then raised to $55.00 per share in a proposal valued at $7.7bn. Tyson Foods has offered $50.00 per share in cash in a proposal valued at $6.8bn.
JP Morgan: Joining two protein companies makes more sense than marrying a meat company with a frozen veg company
In a note written after Pilgrim’s Pride first approached Hillshire, JP Morgan said: “We think Pilgrim’s Pride is a better option for Hillshire shareholders [than a merger with Pinnacle Foods].
“We think Pilgrim’s Pride and Hillshire Brands would bring many more synergies than would Hillshire Brands and Pinnacle Foods, primarily because putting two meat companies together likely would generate sales/marketing efficiencies, back office consolidation, and supply chain benefits.
“From a strategic basis, our logic is similar: We think joining two protein companies makes a lot more sense than marrying a meat company with one that has a focus on frozen vegetables.”
Pilgrim's Pride is the second-largest poultry producer in the world, and is owned by JBS, the world's largest meat processor. Tyson is the largest poultry processor in America.