Pilgrim's offer could derail Hillshire's plans to buy Pinnacle Foods in US$4.23-billion deal
NEW YORK—Pilgrim’s Corp. launched a takeover bid for Hillshire Brands Co. on that would expand its business beyond fresh and frozen chicken into a variety of packaged meats, including Ball Park hot dogs and Jimmy Dean sausages.
The US$5.58-billion offer could derail Hillshire’s plans to buy Pinnacle Foods Group LLC, which makes Birds Eye frozen vegetables, Duncan Hines cake mixes and Hungry Man frozen dinners.
Hillshire had announced the US$4.23-billion deal earlier this month as a way to expand into different parts of the supermarket.
But Pilgrim’s says its offer of $45 per share for Hillshire is “substantially superior” and would allow the companies to cut costs by merging some operations and become a “protein leader” that sells more types of meat.
“As you are well aware, it has long been our desire to acquire the company,” Pilgrim’s said in a public letter to Hillshire CEO Sean Connolly.
In a statement, Hillshire said it continues to strongly believe in the “strategic merits and value creation potential” of its deal with Pinnacle.
The Chicago-based company said it would review Pilgrim’s proposal as part of its fiduciary duties.
Pilgrim’s, which is majority-owned by Brazilian meat company JBS S.A., wants to focus more heavily on branded products, which are more profitable than selling private-label meats to supermarkets and food-service outlets.
Hillshire, which has been struggling with weak sales, is looking for ways to boost its results, including by focusing on products like its Jimmy Dean breakfast sandwiches that aren’t made up entirely of meat.
Pilgrim’s values the deal at US$6.4 billion when debt is included.
The company noted that Hillshire’s deal with Pinnacle lets it consider proposals that might be more favourable to Hillshire stockholders.
Some have questioned the value of Hillshire’s acquisition of Pinnacle, noting that many of Pinnacle’s brands have faced weak sales growth and that the products of the two companies wouldn’t necessarily be compatible.
J.P. Morgan analyst Ken Goldman said in a note to investors that he thought “joining two protein companies makes a lot more sense than marrying a meat company with one that has a focus on frozen vegetables.”
Based in Greeley, Colo., Pilgrim’s says the deal could close in the third quarter of 2014 if Hillshire calls off its deal with Pinnacle.
It said it would pay the US$163-million termination fee required to end that deal.
Pilgrim’s said it will finance its deal with cash on hand and new debt.
Pinnacle didn’t respond to request for comment.