Tyson Beats Pilgrim's Pride; Raises Bid for Hillshire - Analyst Blog

Meat processor Tyson Foods, Inc. TSN seems to have won the bidding war to buy packaged meat producer The Hillshire Brands Company HSH, as reported by Reuters and Bloomberg. The meat battle has taken an interesting turn as Tyson raised its acquisition offer to win over Hillshire, outbidding the offer placed by chicken processor Pilgrim's Pride Corp. PPC on Jun 3.

The terms of the agreement have not been announced yet, but per the New York Times, Tyson is expected to pay $63 per share in cash for Hillshire, valuing the company at more than $7.7 billion. The $63 per share offer is definitely enticing compared to Pilgrim's Pride's raised offer of $55 per share, which values the company at $6.7 billion. The higher bid offered by Tyson Foods shows its determination to win over Hillshire's top meat brands like Jimmy Dean sausages and Ball Park hot dogs. Well written

Tyson Foods had initially offered $50 per share in cash for Hillshire Brands on May 29, which was a counter bid in response to Pilgrim's Pride's offer of $45 per share in cash announced on May 27 for all of the outstanding shares of Hillshire.

Hillshire has currently two alluring offers on the cards. However, there is a holdup, given Hillshire Brands' own plans of buying Pinnacle Foods Inc. PF as announced on May 12. It intends to buy Pinnacle to bolster its presence across the frozen, refrigerated and dry grocery categories.

Tyson is the largest U.S. meat processor by sales and Pilgrim's Pride is the world's second-largest chicken producer after Tyson. Both these companies are looking for opportunities to expand their fresh meat business. Both are vulnerable to weather that has strained beef, pork and poultry supplies lately. Moreover, an unrelenting drought in California and a second outbreak of a deadly pig virus led to soaring pig prices.

The purchase of Hillshire by either Pilgrim's Pride or Tyson would make them the industry leader in chicken production, and would increase their margins in other categories such as desserts and lunch meats to name a few. The purchase would also improve the winning bidder's economy of scale with more customers and shelf space. However, as of now, none of the deals have been approved. Chicago-based Hillshire will review both Tyson's and Pilgrim's proposals but added that it still believes in its plan to buy Pinnacle Foods.

Pilgrim's Pride sports a Zacks Rank #1 (Strong Buy), while both Tyson and Hillshire Brands hold a Zacks Rank #3 (Hold).

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TYSON FOODS A TSN: Free Stock Analysis Report
 
HILLSHIRE BRAND HSH: Free Stock Analysis Report
 
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