May 29-Tyson Foods has offered to buy Hillshire Brands, creating a possible bidding war with Pilgrim's Pride which is also shopping for an acquisition. Lily Jamali reports.
Who's hungry for a food fight? Thursday, food giant Tyson Foods said it had a hankering for Hillshire Brands, topping Pilgrim's Pride's offer by a cool $400 million. Farha Aslam is a managing director at Stephens, a financial services firm: SOUNDBITE: FARHA ASLAM, MANAGING DIRECTOR, STEPHENS INC., BARCLAYS (ENGLISH) SAYING: "Both companies have significant synergy opportunities and have plenty of firepower so it's going to be at the end of the day which management team wants it more." The flurry began earlier this month, when Hillshire made a bid for Pinnacle Foods, which makes products ranging from Aunt Jemima syrup to Birds Eye frozen vegetables. That deal would have helped Hillshire, which primarily sells meat products including Jimmy Dean sausages, diversify into other parts of the food business. Then Pilgrim's decided to make a meal of Hillshire, offering to buy it for $6.4 billion. A Tyson or Pilgrim's Pride tie up to Hillshire makes sense, Aslam says. And a bidding war could well be in the works. SOUNDBITE: FARHA ASLAM, MANAGING DIRECTOR, STEPHENS INC., BARCLAYS (ENGLISH) SAYING: "There's opportunities for both companies to expand that initial bid because it's incredibly accretive for both of them. It's a great strategic fit and debt is cheap. And so it will be accretive for them even at the 55-60 dollar level." Indeed Thursday, Hillshire's stock price shot to $52 a share, 2 bucks more than Tyson's bid, after the company's intentions became known. And set another place at the table because there's a possibility another heavy hitter like Hormel could jump in. Reuters BreakingViews columnist Kevin Allison says the protein industry is experiencing a surge of interest, in part because of changes to the way we eat. SOUNDBITE: KEVIN ALLISON, COLUMNIST, REUTERS BREAKINGVIEWS (ENGLISH) SAYING: "As consumers are dropping carbs in their diet in favor of more protein, that's what's the real attraction behind Hillshire. So I think the reason you're seeing this bidding war is because it's a rare beast in the industry and there's this scarcity premium that seems to be attaching to its shares." Hillshire was spun off from Sara Lee almost two years ago, which experts add holds the added potential benefit of making transactions involving the company tax-free.