Pilgrim's Pride Offers To Buy Hillshire Brands In $6.4 Bln Deal

(RTTNews) - Chicken products maker Pilgrim's Pride Corp. (PPC) Tuesday said that it has made a proposal to acquire Hillshire Brands Co. (HSH) for $45 per share in cash, in a transaction valued at $6.4 billion. The offer is expected to create fully integrated branded protein leader with combined sales of $12.4 billion across broad portfolio of brands. Pilgrim's said its all-cash proposal provides Hillshire shareholders with a substantially superior alternative to Hillshire's pending acquisition of Pinnacle Foods Inc. (PF).

Pilgrim's proposal represents a 25 percent premium to the volume weighted average price of Hillshire shares over the 10 trading days following the announcement of the Pinnacle transaction.

In pre-market activity, Hillshire stock is gaining $8.48 or 22.91 percent, and trading at $45.50, while Pilgrim's Pride stock is losing $0.85 or 3.39 percent and trading at $24.25, and Pinnacle Foods stock is losing $2.27 or 6.82 percent and trading at $31.

It was on May 12 that Hillshire agreed to acquire Pinnacle Foods in a cash and stock transaction with a total enterprise value of $6.6 billion. Under the deal terms, each Pinnacle Foods share would be exchanged for $18 in cash and 0.50 shares of Hillshire stock. The transaction is expected to close by September, and would be immediately accretive to Hillshire's earnings.

In a letter to Hillshire, Pilgrim's Chief Executive Officer Bill Lovette noted that a sale of Hillshire at the indicated price offers superior value and far greater certainty to Hillshire shareholders than the contemplated Pinnacle transaction.

Lovette said, "For Hillshire shareholders, our proposal provides a substantial premium, greater certainty and immediate cash value for their shares... we are confident that Hillshire's Board and shareholders will find our all-cash premium proposal to be superior to the pending acquisition of Pinnacle. For Pilgrim's, the addition of Hillshire's portfolio of iconic brands and broad based marketing, innovation and distribution expertise will enhance our position as a market leader."

The proposed transaction is expected to close in the third quarter of 2014, subject to customary closing conditions and the termination of Hillshire's merger agreement with Pinnacle.

Pilgrim's said its proposal has the unanimous support of its Board of Directors as well as the support of its majority owner JBS S.A.

The operator of chicken processing plants and prepared-foods facilities said it expects to finance the acquisition with a combination of existing cash balances and new debt financing.

Pilgrim's expects the combined company to have a portfolio of both companies' brands, including Pierce, Wing Dings, Jimmy Dean, Hillshire Farm, Ball Park and State Fair. All these are number one or number two in their respective markets, the company said.

In the proposed deal, Pilgrim's expects cost synergies to come from operational and value-chain efficiencies and significant growth opportunities in higher margin branded products, both in North America and internationally. Pilgrim's also said it intends to make Chicago, Hillshire's homeland, a major center of North American operations.

In the offer, Lazard is acting as financial advisor to Pilgrim's and Cravath, Swaine & Moore LLP is acting as its legal counsel.