With Pinnacle Foods out of the picture, Tyson Foods wasted no time finalizing its acquisition of Hillshire Brands.
In a news release sent Wednesday morning, Tyson announced it had entered into a definitive agreement to acquire all outstanding shares of Hillshire. The move came less than two days after Pinnacle announced it would terminate its agreement with Hillshire and take a $163 million breakup fee. Tyson will pay the fee, according to the release.
"We operate in a competitive and complex marketplace that demands bold steps to remain an industry leader," said Tyson CEO Donnie Smith in a statement. "I am confident that together Tyson Foods and Hillshire Brands have the right products and the right people to create years of enhanced shareholder value and ensure more choices for our customers and consumers."
Tyson made a definitive offer to to acquire Hillshire Brands for $63 per share -- or $8.55 billion -- on June 8. However, that offer was dependent on Hillshire finding a way out of its pending merger of Pinnacle.
After Tyson completes its purchase, it will again become the largest seller of prepared meats by leveraging Hillshire's brands, which include Ball Park, Hillshire Farm and Jimmy Dean.
The addition of Hillshire to Tyson's prepared food segment will double the segment's contribution to revenue and quadruple the segment's contribution to operating income. Prepared foods will account for about 18 percent of Tyson's revenue and 20 percent of its operating income.
Prepared foods draw higher profit margins than commodity products, making the segment attractive for Tyson to grow.
Smith pointed to Hillshire's strength in breakfast food as one element that made the company appealing. Jimmy Dean leads the market in breakfast sausage and frozen protein breakfasts, according to a Tyson investor presentation.
The transaction was unanimously approved by the boards of directors of both Tyson and Hillshire and is anticipated to close before Sept. 27, the last day of Tyson Foods' fiscal year , according to a release.
"I am confident that we have found an excellent partner in Tyson," said Hillshire CEO Sean Connolly in a news release. "We firmly believe that our combined global platform will be extremely well positioned to capitalize on the substantial growth opportunities in this market in the years ahead."
Tyson's stock closed at $38.96 Wednesday, up 2.88 percent.
Business on 07/03/2014