May 28, 2014
 

Pilgrim's bid for Hillshire sets back Pinnacle deal

Pilgrim's Pride Corp has offered to buy Hillshire Brands Co for US$6.4 billion, as the world's second-largest chicken processor seeks to expand its market share in processed meats, Reuters reports.

Hillshire's shares soared almost 23% on news of the bid, which came two weeks after the maker of Hillshire lunch meats and Jimmy Dean Sausages offered to buy Pinnacle Foods Inc, known for its Birds Eye frozen vegetables, in a US$4.3 billion deal.

Pilgrim's competing overture, which requires Hillshire to drop its Pinnacle bid, signalled an aggressive return to deal making by Brazilian meatpacking giant JBS SA, which owns about 75% of Pilgrim.

"A sale of (Hillshire) at the price... offers superior value and far greater certainty to Hillshire shareholders than the contemplated Pinnacle transaction," Pilgrim's chief executive William Lovette said in a letter to Hillshire.

Hillshire's shareholders are more likely to welcome Pilgrim's offer as a deal with Pinnacle would lead to a suspension of the Hillshire's share buyback program and burden it with US$2.3 billion of debt.

A buying spree launched in 2005 transformed JBS into the world's largest beef producer with more than 14 major acquisitions in six years, including US rivals Swift, Smithfield Beef and Pilgrim's Pride.

Pilgrim said it expects the Hillshire deal to close in the third quarter and to be immediately accretive to earnings per share. It expects to fund for the deal with existing cash and third party financing.

US antitrust regulators would determine if the Pilgrim-Hillshire deal means that costs would be transferred to farmers and consumers because there are too few competitors to prevent large firms from unfairly raising prices.