Pilgrim's/JBS Makes $6.4 Billion Offer for Hillshire

May 27, 2014
Contingent on Hillshire canceling its pending acquisition of Pinnacle Foods.

Pilgrim's Pride Corp., which once before went bankrupt after an overly aggressive acquisition, has made a $6.4 billion takeover offer for Hillshire Brands Co. -- contingent on Hillshire canceling its pending acquisition of Pinnacle Foods Inc. That deal, announced two weeks earlier, had Hillshire paying $4.23 billion for Pinnacle.

The purchase reportedly would involve about $5.7 billion in cash and the assumption of Hillshire debt.

This time Pilgrim's Pride has a parent with deep pockets. The former Pittsburg, Texas, poultry company is publicly traded but 75 percent of its stock is held by Brazilian meat company JBS SA. Pilgrim's filed for Chapter 11 bankruptcy protection in December 2008, a year after its $1.3 billion acquisition of bigger competitor Gold Kist Inc. At the time, an oversupply of chicken, weak market pricing and softening demand made the purchase ill timed, and Pilgrim's Pride never recovered.

In December 2009, JBS came in and bought the majority of Pilgrim's stock, enabling the company to exit bankruptcy. JBS had entered the U.S. meat market with the 2007 acquisition of Swift & Co.

In a statement, Hillshire said: “We continue to strongly believe in the strategic merits and value creation potential provided by the proposed transaction with Pinnacle Foods. Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisers, Hillshire Brands' Board will thoroughly review the Pilgrim's Pride proposal.”

One news report said the offer comes after Pilgrim's Pride and Hillshire officials met in February in Chicago, where the latter is headquartered. The meeting included a promise to headquarter all of Pilgrim's Pride or at least what would become its prepared foods business in the Windy City.

Both firms apparently have the same general goal. Pilgrim's (and JBS) wants to expand beyond animal protein. Hillshire wants more packaged foods and in categories other than its hot dogs, deli meats and Jimmy Dean breakfast products – all left over from the days it was Sara Lee, which split into two companies in 2012. Hillshire has made a handful of small acquisitions in recent months. Pinnacle would have brought Hillshire Birds Eye frozen vegetables, Duncan Hines cake mixes and Hungry Man frozen dinners.

Interestingly, the Wall Street Journal reported in December 2010 that JBS SA was pursuing a takeover of Sara Lee Corp. The negotiations, if real, never went public.

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