Tyson Foods Inc. has agreed to buy Hillshire Brands Co. after a mammoth bidding war in which it agreed to fork over about $7.7 billion.
The country's largest U.S. meat processor by sales will pay $63 a share in cash for Chicago-based Hillshire, whose brands include Jimmy Dean sausage and Ball Park franks. Including the assumption of Hillshire's debt, the deal is worth $8.55 billion, Tyson said in a statement.
Springdale, Ark.-based Tyson beat out rival Pilgrim's Pride, which offered $55 a share in a spirited bidding war that started last month when Hillshire offered to buy another company, Pinnacle Foods Inc.
In an unusual twist, Hillshire went from would-be acquirer to prey when Pilgrim made an unsolicited offer for the company. Tyson then entered the fray, ultimately outbidding Pilgrim by a wide margin.
Tyson and Pilgrim's Pride, the world's second-largest chicken producer after Tyson, each are trying to expand beyond the volatile fresh-meat sector into the more stable and profitable prepared-food business. The companies are vulnerable to weather and other adverse events that squeeze beef, pork and poultry supplies.
“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," said Donnie Smith, Tyson’s chief executive.
As part of its deal, Tyson expects Hillshire to nix the previously announced merger with Pinnacle Foods that would force Tyson to pay a $163-million breakup fee.
Yet in a statement, Hillshire said it had received the offer but its board hasn't yet made a decision.
"The Hillshire Brands board of directors has not approved the Tyson Foods offer, has not changed its recommendation regarding the Pinnacle merger and is not making any recommendation with respect to the Tyson offer," the company said. "There can be no assurance that any transaction will result from the Tyson Foods offer."
Tyson shares were down $1.80, or 4.49%, to $38.32 in late morning trading. Hillshire Brands' shares were up $2.98, or 4.91%, to $61.81.