Investors are now waiting to see whether bidder
The $55-per-share bid, worth about $6.82 billion, is the second from Greeley, Colo.-based Pilgrim's Pride as it competes with rival Tyson to win Hillshire, maker of Jimmy Dean sausages and Ball Park hot dogs. Tyson offered $50 a share last week, two days after Pilgrim's Pride first offered $45 a share. Tyson did not comment on Tuesday.
Hillshire shares were up 9.6 percent to $58.69 per share Tuesday afternoon, after rising to a new high of $58.74 earlier in the day. Pilgrim's Pride's shares fell 1.7 percent to $25.47, while Tyson's shares fell 2.3 percent to $42.41.
Hillshire Chief Executive Sean Connolly declined to say much about the deal speculation at a previously planned engagement at an Executives' Club of Chicago breakfast on Tuesday morning, which drew a crowd of more than 300 people.
"It was a slow week, so I was looking for something to do," Connolly joked during his speech, which came hours after Pilgrim's Pride publicly announced its higher offer.
Connolly said he originally planned to come to the event and do his best "to convince you that we are building a highly attractive company at Hillshire Brands." After bids for the company emerged last week, he said, "you don't have to take my word for it."
Shares of Hillshire closed at $37.02 per share on May 23, the last day of trading before Pilgrim's Pride announced its bid on May 27. They have been trading above $50 since Tyson announced its bid on May 29.
Pilgrim's Pride and Tyson have expressed interest in Hillshire due to its strong presence in U.S. grocery stores, with brand-name products such as Jimmy Dean breakfast sausage. Hillshire, formed when conglomerate Sara Lee split apart in 2012, has been bringing out new products and acquiring smaller companies such as Van's Natural Foods while cutting other costs.
Its foodservice business, including Sara Lee pies, could also compliment the sales that Pilgrim's Pride and Tyson each do to outlets such as restaurants, schools and hotels. The suitors each have international operations where they could expand the reach of Hillshire's products. Right now, virtually all of Hillshire's sales come from the United States.
Plus, both Pilgrim's Pride and Tyson see opportunities to cut additional costs.
"While we agree that Hillshire would be an attractive complementary piece in Tyson's meat portfolio and see room to identify cost synergies, we think it will be extremely difficult for either Tyson or Pilgrim's Pride to generate enough synergies to make the deal attractive at these prices. In fact, if Tyson participates in another round of the bidding war, we think there is a strong likelihood that the firm would overpay,"
Now, Hillshire's board plans to share information with Pilgrim's Pride and Tyson and hold separate discussions with both suitors regarding their unsolicited proposals.
Pilgrim's Pride extended its higher offer to Hillshire on June 1 and publicly announced it on Tuesday. Pilgrim's Pride is smaller than Tyson, but is majority owned by Brazil's JBS S.A., the largest meat company in the world. Pilgrim's Pride said its revised proposal is not subject to any financing conditions or contingencies. Tyson said last week that its offer of $50 per share had no financing conditions.
An acquisition of Hillshire would disrupt its mid-May offer to buy
Any successful suitor would have to cover a $163 million breakup fee Hillshire has to pay to Pinnacle Foods if that deal is scrapped. A suitor would also be responsible for Hillshire's net debt, which totaled $553 million at the end of March.
Hillshire said on Tuesday it cannot terminate its pending offer to buy Pinnacle Foods based on either proposal, and cannot enter into a new acquisition agreement without terminating its offer for Pinnacle.
"Stay tuned," Connolly said after his prepared remarks and a moderated question-and-answer session. "Everybody will kind of see how the ball bounces from here."
Hillshire has not said how soon it might reach a decision about any of the proposed deals. It is possible that Connolly, who is on Hillshire's nine-member board of directors, will look back on the advice he said he took from a mentor when he started as CEO.
"Trust your gut and make decisions swiftly," he said on Tuesday.
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