Boston, MA 06/11/2014 (wallstreetpr) – Tyson Foods, Inc. (NYSE:TSN)‘s deal to acquire Hillshire Foods (HSH) has not gone down so well with the investors and particularly analysts, as the food manufacturing company witnessed its shares plunge by nearly 4% on Tuesday.
Hasty Decision
To start with, an analyst at Credit Suisse, Robert Moskow downgraded the stock from perform to underperform and lowered the price target of the stock to $35 per share. In its note, the research firm stressed at the excessively high price at which Tyson took away the deal from Pilgrim’s Pride (PPC). Moskow notes that the investment at 70% premium over Hillshire’s current price could return value to the investors only after a length of seven, ten or twenty years, and thus, fails to convince the investors, who generally maintain a short term outlook about any company.
Moskow asserts that he sees the investment in Tyson Foods, Inc. (NYSE:TSN) for the next 12 months unfruitful, as it would take time for Tyson to recover from its hasty decision to buy Hillshire at such a hefty price, which includes $1.6 billion payment in equity. There is a looming threat over the company as the negative trading in the stock could force Tyson to issue more shares in order to complete the deal.
Hillshire’s Anxiety
The reason for bidding such a price by Tyson could be attached to Hillshire’s anxiousness and eagerness to come to a final decision. Hillshire had requested both Tyson and Pilgrim to submit proposals, where the winning bid had to be $2.50 per share higher than the other’s. Thus, Tyson ended up winning the bid with its $63 per share offer, while Pilgrim Pride did not even increased a penny above its previous offer of $55 per share. It is a big loss for Tyson Foods, Inc. (NYSE:TSN) to get Hillshire at $63 per share, which it could have easily earned at a $57.50 price.
