Tyson Foods, Inc., Springdale, Ark., submitted a unilaterally binding offer to acquire all outstanding shares of The Hillshire Brands Co., Chicago, for $63 per share in cash. The offer is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods Inc., Parsippany, N.J.
This move follows a bidding process conducted by Hillshire Brands that concluded June 8. The all-cash transaction is valued at approximately $8.55 billion, including Hillshire Brands’ outstanding net debt, and represents a multiple of 16.7x trailing 12 months adjusted EBITDA or 10.5x including $300 million in synergies.
“The Hillshire Brands acquisition would represent a defining moment for Tyson Foods,” says Donnie Smith, Tyson’s president and CEO. “Our strategy has been to grow our prepared foods business, and it has been our aspiration to be a leader in retail prepared foods just as we are in chicken. Now we will have those iconic No. 1 and No. 2 brands in numerous categories.”
“Tyson Foods has a history of growing through strategic acquisition,” says John Tyson, chairman of the board. “It is the view of the board of directors that this is truly a transformational opportunity and one that best fits with our strategic plan while enhancing our margins and creating long-term shareholder value.”
The combination of Tyson and Hillshire Brands would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands, including Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm. In particular, the strength of Hillshire Brands’ products in the breakfast category would allow Tyson to capture opportunities in this fast-growing daypart.
“After a disciplined process to identify ways of growing our prepared foods segment, we are convinced that combining Tyson and Hillshire Brands would make strategic, financial and operational sense and would stabilize earnings by increasing return on sales and de-commoditizing our business,” Smith says.
Tyson’s pork processing operations would benefit from stable and consistent demand for its raw materials for use in Hillshire Brands’ branded, value-added products. Any transaction would be subject to regulatory approval and other customary closing conditions.