Tyson Foods Inc. has won a bidding war for Hillshire Brands, the maker of Jimmy Dean sausages and Ball Park hot dogs, with a $63 US per share offer.
Tyson had been vying with rival poultry producer Pilgrim's Pride for Hillshire Brands, which ended its bidding process Sunday. Tyson had previously offered $50 per share for the company. Pilgrim's Pride then raised its bid to $55 per share.
Pilgrim's Pride said Monday that it is withdrawing its offer.
Tyson, one of the U.S. biggest meat packers, stopped buying Canadian cattle last year because of the U.S. country-of-origin meat labelling laws would have raised the cost of packaging its products.
Its deal for Hillshire is not sealed yet. It is contingent on Hillshire abandoning its plan to acquire Pinnacle Foods Inc., which makes Birds Eye frozen vegetables and Wish-Bone salad dressings.
Hillshire Brands said Monday its board of directors has not yet approved Tyson's offer. The company said it does not have the right to end the deal with Pinnacle on the basis of the Tyson offer, or enter into an agreement with Tyson before the deal is terminated.
"There can be no assurance that any transaction will result from the Tyson Foods offer," Hillshire said in a statement.
Tyson's offer will be in place until Dec. 12, the final termination date of the deal with Pinnacle.
Deal is about profitability of prepared foods
The takeover bids by Pilgrim's Pride and Tyson Foods were driven by the desirability of brand-name, prepared foods like Jimmy Dean breakfast sandwiches. Those types of products are more profitable than fresh meat, such as chicken breasts, where there isn't as much wiggle room to pad prices.
While Pilgrim's Pride and Tyson both sell such products, their businesses have been more focused on supplying supermarkets and restaurant chains.
In particular, Tyson said it was drawn by Hillshire's stable of breakfast foods, which would better position it in the fast-growing category.
Hillshire, based in Chicago, had been trying to diversify its own portfolio by moving into other areas of the supermarket with the $4.23 billion acquisition of Pinnacle. But some investors questioned the wisdom of that deal, given the outdated image of many Pinnacle brands, and the differences in the two companies' product portfolios.
The offer from Tyson is worth $7.75 billion based on Hillshire's 123 million shares outstanding. Tyson values the deal at $8.55 billion, including debt.