Pilgrim’s Pride tops Tyson Foods’ offer for Hillshire

Pilgrim's Pride, the second-largest US chicken processor, raised its offer for Hillshire Brands, escalating a bidding war with Tyson Foods Inc for the maker of Jimmy Dean sausages.

Hillshire shares rose more than 9 per cent to a record high of $58.50 on the New York Stock Exchange this morning, after Pilgrim’s Pride said it raised its offer to $55 per share from $45.

Tyson Foods spokesman Worth Sparkman declined to comment. The company, the world’s second-largest meat processor after Brazil’s JBS SA, had offered $50 per share. JBS owns about 75 per cent of Pilgrim’s Pride.

The bids pit the two largest meat processors against each other as they seek to expand margins that have been hit by low prices and volatile feed costs.

Hillshire has significantly higher pricing power as it sells brands such as Jimmy Dean and Ball Park sausages, which are number one or two in their categories in the US.

Tyson had long-term debt of $1.89 billion and cash and cash equivalents of $438 million on March 29th, according to its latest quarterly filing. The company was valued at $15.12 billion, based on yesterday’s closing price of its shares.

“It is a good time to go shopping for higher margin businesses,” Trefis analysts said based on Tyson’s current debt position.

Tyson shares were down 2 per cent on the New York Stock Exchange.

Pilgrim’s Pride shares were also down nearly 2 per cent on the Nasdaq, while shares of JBS fell the same amount on the Sao Paulo Stock Exchange.

Hillshire said today it would “provide information” to both bidders and conduct talks with them.

Pilgrim’s Pride said its offer valued Hillshire at $7.7 billion, including debt. Tyson Foods’ offer values Hillshire at $6.8 billion, including $500 million in debt.

– (Reuters)