Boston, MA 06/10/2014 (wallstreetpr) – One of the biggest processors of beef, chicken, and pork, Tyson Foods, Inc. (NYSE:TSN) had boosted its bidding price for the Hillshire Brands Co (NYSE:HSH) to take control of the company to extend its presence in the prepared food market. However, Hillshire Brands Co is yet to make up its mind whether to recommend the offer or reject it. Tyson Foods’ sweetened offer allowed another bidder Pilgrim’s Pride Corporation (NASDAQ:PPC) to withdrew from the race.
Sweetens Bid
Tyson Foods has increased its offer to $63 a share or $7.7 billion in cash for The Hillshire Brands Company from its previous bidding price of $50 a share or $6.2 billion in cash. Including the debts, the deal is valued about $8.55 billion. Tyson Foods has made it clear that the offer is subject to the Hillshire Brands Co released from its current deal to buy Pinnacle Foods Inc. (NYSE:PF).
The history of Tyson Foods suggests that its growth was achieved through tactical acquisition. Therefore, its board views that the Hillshire Brands Company fits its scheme things of tactical planning and will also boost its margins thus offering long-term value to its shareholders.
Benefit of Hillshire Brands Acquisition
The interest shown by Tyson Foods in acquiring Hillshire Brands Co (NYSE:HSH) indicates that it wants to reposition itself as a leader in prepared foods segment, with matching portfolio of well-established brands, including Jimmy Dean, Tyson, Wright, Ball Park, Hillshire Farm and State Fair.
Tyson Foods, Inc. (NYSE:TSN) wants to grab opportunities in the breakfast category, where the Hillshire Brands Company holds edge because of its attractiveness and fast-growing day part. The offer meant to help Tyson Foods establish its leadership position in prepared foods segment in the retail sector similar to their position in chicken.
Synergies
Tyson Foods, Inc. (NYSE:TSN) sees over $300 million realization in annual synergies driven mainly by efficiencies in operations, distribution, supply chain, purchasing, and upgrading raw materials. Aside from these, the merged entity could benefit from talented sales and marketing teams besides alignment of shared service functions. The company expects complete synergies by the end of the third year.
Currently, only Tyson Foods is in the race. Therefore, the Hillshire Brands Co (NYSE:HSH) will have to choose whether to agree to the acquisition proposal of Tyson Foods or stay independently, for which the management will have to do a lot of work to convince its shareholders.
