Tyson Foods submits $8.55bn offer to acquire Hillshire Brands

US-based meat processor Tyson Foods has submitted a unilaterally binding offer to acquire packaged food company Hillshire Brands for $63 per share in cash, in a deal which values the company at $8.55bn, including outstanding net debt.

The proposal is higher than Pilgrim’s Pride’s offer of $55 per share on 5 June 2014, which values the company at $7.7bn.

Tyson initially offered $50 per share on 29 May 2014, two days after a $45 per share offer from Pilgrim’s Pride.

According to Tyson Foods, the offer is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods.

The board of directors of Tyson Foods have unanimously approved the offer, which will remain in effect until 12 December 2014, the final termination date of the Hillshire Brands/Pinnacle Foods agreement.

Tyson would fund the transaction by cash on hand and a fully committed bridge facility from Morgan Stanley Senior Funding and JP Morgan Securities.

Tyson Foods president and CEO Donnie Smith said the Hillshire Brands acquisition would represent a defining moment for the company.

"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. Now we will have those iconic #1 and #2 brands in numerous categories," Smith added.

The combination of the firms would strengthen Tyson’s position in the retail sale of prepared foods with well-recognised brands such as Tyson, Wright Brand, Jimmy Dean, Ball Park, State Fair and Hillshire Farm.

In addition, the strong presence of Hillshire Brands products in the breakfast category would allow Tyson to increase its market share in this fast-growing category.

The company would expect annual synergies in excess of $300m through operational efficiencies, purchasing, distribution, supply chain efficiencies, and upgrading raw materials.

Tyson noted that its pork processing operations would benefit from stable and consistent demand for its raw materials for use in Hillshire Brands’ branded and value-added products.

Morgan Stanley and JP Morgan are serving as financial advisors to Tyson Foods, while Davis Polk & Wardwell is acting as legal counsel.