Tyson Foods, Inc.
) has finally received the nod from the Antitrust Division of the
Department of Justice to purchase packaged meat producer, The
Hillshire Brands Company (
) for $8.55 million. In order to get the approval, Tyson had to
agree to divest its Heinold Hog Markets unit, as per a deal with
the Department of Justice.
Heinold Hog Markets is a unit of Tyson Hog Markets and buys aged
hogs from independent pig farmers for sale to sausage and other
meat processors. Hillshire purchases hogs from them to make
sausages for its Jimmy Dean and Hillshire Farm brands. The combined
companies account for more than one-third of sow purchases in the
country. Had the division not been agreed to be sold, Tyson, after
the merger, would have had the power to push down the prices paid
to hog farmers, per the media reports.
Hence, the government required Tyson to divest the hog
purchasing business in order to ensure healthy competition among
hog breeders in the U.S. while selling sows. Both the companies
have agreed to operate it as an independent business until a buyer
for the division is found.
Tyson Foods had formally struck a deal with Hillshire Brands on
Jul 2, after a long fought bidding war with poultry producer
Pilgrim's Pride Corp. (
). Per the deal, Tyson Foods will pay $63 per share in cash for all
the outstanding shares of Hillshire, valuing the company at
approximately $8.55 billion, including debt.
However, for the transaction to go through, Hillshire had to
terminate its deal to buy frozen foods maker Pinnacle Foods, Inc. (
). Chicago-based Hillshire Brands had proposed to buy Pinnacle
Foods for about $6.6 billion on May 12, including debt, in order to
diversify its portfolio. (Read:
Hillshire to Buy Pinnacle Foods for $6.6B
Both Hillshire and Tyson have a Zacks Rank #3 (Hold).
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TYSON FOODS A (TSN): Free Stock Analysis Report
HILLSHIRE BRAND (HSH): Free Stock Analysis
PINNACLE FOODS (PF): Free Stock Analysis Report
PILGRIMS PRIDE (PPC): Free Stock Analysis
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