Hillshire Brands Co. on Tuesday said it would hold separate talks with Pilgrim’s Pride Corp. and Tyson Foods Inc., which have each offered to buy the maker of Jimmy Dean sausage and Ball Park hot dogs. Pilgrim’s Pride initially offered to buy Hillshire Brands for $45 per share but was outbid by Tyson Foods’ $50 per share offer. This week Pilgrim’s Pride revised its offer for Hillshire to $55 per share or $6.8 billion, which tops Tyson’s’ offer of $50 per share, or $6.2 billion.
Hillshire, based in Chicago, had been trying to diversify its own portfolio by moving into other areas of the supermarket with the $4.23 billion acquisition of Pinnacle, the maker of Birds Eye frozen vegetables. The offers from both Pilgrim’s Pride and Tyson Foods are contingent on the cancellation of Hillshire’s deal to acquire Pinnacle.
Hillshire’s board said earlier this week that it was going to speak to Pilgrim’s Pride and Tyson about a possible acquisition. To do so under its agreement to buy Pinnacle, Hillshire was required to conclude that the dueling offers are “reasonably expected to lead to” a proposal superior to the Pinnacle deal. By doing so, Hillshire was acting to fulfill the board’s fiduciary duties to explore the offers. If Hillshire decides to accept either offer, it cannot unilaterally terminate the Pinnacle deal because it has a “force the vote provision,” which means Pinnacle can require Hillshire to hold a shareholder vote on the transaction. Only after Hillshire’s shareholders vote can the company end the Pinnacle agreement.
