Pilgrim’s Pride Corp has initiated a takeover bid for packaged food firm Hillshire Brands Co. in a deal estimated at $6.4 billion in value, including debt, as the second-largest chicken producer in the world tries to grow its protein portfolio with sausages and lunch meats from Hillshire.
Shares of Chicago-based Hillshire added almost 23% on news of the acquisition offer, which came two weeks after the company alongside Jimmy Dean Sausages made a move to acquire Pinnacle Foods Inc, the maker of the famous Birds Eye frozen vegetables, in a deal valued at around $4.3 billion, Reuters reported.
Pilgrim’s takeover bid, which needs Hillshire to abandon its proposal for Pinnacle, marked a massive return to deal making by JB SA, a Brazilian meatpacking firm that holds about 75% stake in Pilgrim’s.
An acquisition campaign kicked off in 2005 made JBS the biggest beef processor in the world, buying more than 14 businesses in six years, including US competitors Swift, Smithfield Beef and Pilgrim’s Pride.
Soaring demand for meat on a global scale has buoyed other massive protein merger and acquisitions, including the $5 billion purchase of giant pork processor Smithfield Foods in 2013 by WH Group Ltd of China, formerly called Shuanghui International Holdings.
Investors were not upbeat on a Hillshire-Pinnacle merger, pushing stocks down 6% in intraday trading on news of the proposal on May 12.
According to LaTimes, Hillshire said it would take a look at Pilgrim’s overture, although it was still determined to buy Pinnacle.
“We feel confident that Hillshire shareholders will recognize the superior value this proposal represents for them. For Hillshire shareholders, our proposal provides a substantial premium, greater certainty and immediate cash value for their shares,” Pilgrim’s Pride boss Bill Lovette said.
Analyst Ken Goldman of J.P. Morgan said in a client note that the Pilgrim’s proposal was superior to the Pinnacle bid, both strategically and financially.
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