Boston, MA 05/30/2014 (wallstreetpr) – Tyson Foods, Inc. (NYSE:TSN) proposes to acquire Hillshire for $50.00 per share in cash, which represents 35% premium on the closing price on the Company’s share on May 9, 2014. The total value for the transaction was $6.8 billion, including Hillshire net debt. The transaction value was 13.4x on Hillshire’s trailing adjusted EBITDA (LTM).
The proposal not only provides a significant return to Hillshire shareholders but also offer an alternative as Hillshire is likely to acquire Pinnacle Foods in their previous announcement.
Rationale behind synergy
Tyson Foods, Inc. (NYSE:TSN) will reposition as a market leader in retailing of prepare foods with the combination with Hillshire. It will include a comprehensive range of popular brands and private label products which are complementary to each other. It will also allow Tyson to create an opportunity in the breakfast category with Hillshire’s products.
In addition, the synergy will integrate the entire protein chain of products so to make a leading position in the industry. Tyson Foods, Inc. (NYSE:TSN) also benefits from its retail packaged meat business as the acquisition will be complementary to the existing business.
Financial help over synergy
In last 12 months ended March 29, 2014, Tyson reported sales of $35.4 billion and the combination will increase the revenue to $39.4 billion. The addition of prepared foods will primarily drive growth in overall revenues of Tyson as it increases the contribution from 9% to 18%.
Subsequently, it will increase the EBITDA from $2.1 billion to $2.6 billion that will increase the prepared foods segment margin from 5% to 20%.
Tyson expects growth in margin and EPS in the first year after the completion of proposed transaction that will benefit its shareholders.
Conclusion
The acquisition will accelerates growth in the growing sales in prepared foods and breakfast category. It also increases the innovation while integrating the capabilities of both the companies and creates a new opportunity to grow.
