Tyson Foods Inc. has offered Hillshire Farm $7.7 billion in attempt to take over the company, outbidding the previous offer by Pilgrim’s Pride Inc., and thus winning the bid war. Tyson is offering $63 a share and to take on all of Hillshire’s debt, making the offer worth over $8 billion in the end.
According to BusinessWeek, Tyson wants to take over Hillshire Farm in order to branch out from its current meat business. The company desires to take on pre-packaged meats, which leads to higher profits. The combination of Hillshire and Tyson would produce a net income of over $1 billion and bring in nearly $40 billion in annual earnings from sales.
Hillshire currently has a deal with Pinnacle Foods to take over their company for $6.6 billion. In order to terminate the deal, Hillshire Farm would have to pay the company $163 million. A previous offer by Pilgrim’s Prideagreed to pay the termination fee as well as all other Hillshire Farm debt. After Tyson’s most recent bid, Pilgrim’s Pride retracted its offer.
Tyson’s deal with Hillshire Farm is dependent on whether or not the company ends its plans to take over Pinnacle Foods. Hillshire announced on Monday that it has received the offer but its board of directors have yet to approve it. The company also stated that the offer gives them no right to end its contract with Pinnacle or to begin a new contract with Tyson before the previous deal is ended, The Associated Press noted.
Investors say that acquiring the company would be a wise move since it has such low debt, while still bringing in a steady flow of cash at $174 million per year. No word at this time on whether Hillshire Farm will accept the offer.