June 11, 2014


Tyson seeks to acquire Hillshire for US$8.55 billion in cash


Tyson Foods, Inc. has submitted a unilaterally binding offer to acquire all outstanding shares of The Hillshire Brands Company for a price of US$63 per share in cash.


The offer is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods Inc.. It follows a bidding process conducted by Hillshire Brands that concluded last Sunday with Hillshire's other suitor, Pilgrim's Pride, announcing in a statement on Monday that it was withdrawing its offer.


The all-cash transaction is valued at approximately US$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 US$300 million in synergies.


"The Hillshire Brands acquisition would represent a defining moment for Tyson Foods," said Donnie Smith, Tyson's president and chief executive officer. "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 number one and number two brands in numerous categories."


"Tyson Foods has a history of growing through strategic acquisition," said 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 Tyson family and the board are prepared to issue shares to maintain the company's investment grade credit rating.


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-recognised 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 the fast-growing segment.


"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 stabilise earnings by increasing return on sales and de-commoditising our business," Smith said.


Tyson would expect to realise annual synergies in excess of US$300 million driven primarily by operational efficiencies, purchasing, distribution, supply chain efficiencies, upgrading raw materials and through the combination of the two companies' sales and marketing teams and alignment of shared service functions. Synergies are expected in the first full fiscal year with the total synergies to be realised by the end of year three.

The offer was unanimously approved by the Board of Directors of Tyson Foods, and will remain in effect until December 12, 2014, the final termination date of the Hillshire Brands/Pinnacle Foods agreement.