Meat products company
Pilgrim's Pride Corporation
) has recently offered to acquire its peer,
The Hillshire Brands Company
). The transaction offer is valued at $6.4 billion, translating to
$45.00 per share.
The proposition comes as a better alternative to Hillshire's
plan of acquiring another peer
Pinnacle Foods Inc.
), for an agreed consideration of $6.6 billion. According to the
deal, Hillshire will pay $18.00 in cash and 0.50 share of Hillshire
Brands common stock for each share of Pinnacle.
The offer from Pilgrim's Pride reflects a 25% premium to the
weighted average price of Hillshire following the Pinnacle Foods
acquisition announcement. The offer price also represents 12.5x
Hillshire's trailing adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA).
If consummated, the acquisition will create a combined entity of
$12.4 billion revenues and $1.4 billion EBITDA in the last 12
months. The entity will have many known brands to its credit
including Wing Dings, Ball Park, Pierce, Jimmy Dean, Hillshire Farm
and State Fair, which hold high ranks in their respected markets.
Pilgrim's Pride also intends to make Chicago a centre for its North
American operations, post the acquisition.
Pilgrim's Pride plans to fund the takeover through its existing
liquidity and new third-party financing. The company has
significant cash and cash equivalents of $552 million, which will
aid in funding the acquisition.
With growth in the meat products industry, this deal, if closed,
may prove immensely beneficial for Pilgrim's Pride. It will empower
the company to attain higher market shares and a strong foothold in
the industry. With a market capitalization of $6.6 billion,
Pilgrim's Pride sports a Zacks Rank #1 (Strong Buy). Another stock,
Sanderson Farms, Inc.
), with a Zacks Rank #1, can also be considered for investment.
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HILLSHIRE BRAND (HSH): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis Report
PILGRIMS PRIDE (PPC): Free Stock Analysis
SANDERSON FARMS (SAFM): Free Stock Analysis
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