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Pilgrim’s Pride Hillshire

May 27, 2014 by  

Pilgrim’s Pride Hillshire, Pilgrim’s Pride offered on Tuesday to pay $6.4 billion in cash for Hillshire Brands, hoping to derail the sausage maker’s planned acquisition of a packaged foods company.

Under the terms of its bid, Pilgrim’s Pride would pay $45 a share, about 22 percent above Hillshire’s closing share price on Friday and 25 percent higher than the volume-weighted average price over the last 10 trading days.

Through the deal, Pilgrim’s Pride and its controlling owner, the Brazilian meat giant JBS, are hoping to stop Hillshire’s deal to buy Pinnacle Foods for $4.3 billion. Several investors have argued that the earlier transaction did not provide enough value, with one hedge fund manager saying publicly that he would vote against the Pinnacle acquisition.

Pilgrim’s Pride approached Hillshire about a potential deal at a meeting in February, but was rebuffed, according to a person briefed on the matter. When the company learned of the Pinnacle transaction this month, it decided to act.

Behind the unsolicited bid is a clause in the Pinnacle transaction that allows Hillshire’s board to weigh a takeover bid for their company that is reasonably likely to lead to a superior outcome for their shareholders.

Pilgrim’s Pride is betting that Hillshire’s shareholders will favor an acquisition by one of the country’s biggest poultry producers, rather than a highly criticized takeover of brands like Birds Eye frozen vegetables and Duncan Hines cake mix.

“We are coming forward now because the opportunity for your shareholders to obtain the compelling value represented by our proposal will no longer exist if the proposed acquisition of Pinnacle is consummated,” Bill Lovette, the chief executive of Pilgrim’s Pride, wrote in a public letter to his counterpart at Hillshire Brands, Sean Connolly.

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