Hillshire Brands Co. (NYSE:HSH): Gains 22% Over Pilgrim’s Pride’s Buyout Offer

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Dallas, Texas 05/28/2014 (FINANCIALSTRENDS) – Hillshire Brands Co. (NYSE:HSH) yesterday received a buyout offer from Pilgrim’s Pride Corporation (NASDAQ:PPC) for $45.00 per share in cash which represents an attractive proposal for Hillshire shareholders. The said proposal provides attractive valuation of $6.4 billion. This certainly offers a potential alternative to Hillshire shareholders given its pending acquisition of Pinnacle Foods. The proposal offers a compelling value of 12.5x of the company’s trailing adjusted EBITDA, including the termination fee of $163 million payable to Pinnacle.

The Transaction

The transaction will help Pilgrim’s Pride to be a leading company with diversified protein product portfolios of Hillshire and Pilgrim’s brands with combined sales of $12.4 billion. Pilgrim’s Pride intends to finance the buyout with a combination of new debt financing and existing cash balances. The proposal already has received support from Pilgrim’s majority owner JBS S.A. as well as its Board of Directors. If the proposal goes through, the transaction may close by 3Q14. However, it will be subject to Hillshire Brands Co. (NYSE:HSH)’s termination of merger agreement with Pinnacle and regulatory as well as shareholder approval. Lazard and Cravath, Swaine & Moore LLP are acting as Pilgrim’s financial advisor and legal counsel, respectively, for this transaction.

Hillshire’s Response

Hillshire Brands Co. (NYSE:HSH) responded to Pilgrim’s unsolicited proposal and mentioned to thoroughly review the Pilgrim’s Pride proposal. However, the statement also mentioned that the Hillshire strongly believe in value creation potential and strategic merits offered by their proposed merger with Pinnacle Foods. Goldman, Sachs & Co. and Centerview Partners are financial advisors to Hillshire and Skadden, Arps, Slate, Meagher & Flom LLP is acting as legal advisor.

Hillshire Brands, leader in convenient foods, reported $4 billion worth of sales in FY13. The Chicago based company employs over 9,000 people and its portfolio brands include Ball Park, Aidells and Hillshire Farm among others.

Stock Update:

Yesterday, the stock of Hillshire Brands shot up more than 22% and closed at $45.19, after hitting a 52 week high of $45.52. The stock traded with significant volume of 41.66 million shares.

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