Pilgrim's Pride Leaves the Race to Tyson for Hillshire Brands - Analyst Blog

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The U.S. meat industry has lately seen a stiff contest between two prominent companies to takeover a peer. The largest U.S. meat processor, Tyson Foods, Inc. ( TSN ) and the world's second largest chicken producer, Pilgrim's Pride Corp. ( PPC ) were in the news for sometime regarding their dogfight to acquire the packaged meat producer The Hillshire Brands Company ( HSH ). Hillshire Brands is best known for their Jimmy Dean sausages, Ball Park hot dogs and Sara Lee brands.

Recently, there had been a decline in beef, pork and poultry supply due to adverse weather, along with an unrelenting drought in California and a second outbreak of a deadly viral pig epidemic that led to soaring pig prices. Consequently, the market players are now looking forward to meet their requirements and gain higher share.

According to the latest update, Pilgrim's Pride has withdrawn its proposal to acquire Hillshire at the previously announced price of $55.00 per share. Pilgrim's Pride retreated from the race as Tyson came up with a far superior offer of $63.00 per share for Hillshire.

Although Pilgrim's is still looking for prospective acquisitions, it was firm in its decision of not acquiring Hillshire for an increased value. Notably, this chicken war to purchase the meat products company started with Hillshire's announcement to acquire Pinnacle Foods Inc. ( PF ) on May 12.

Per Tyson's current offer, it intends to acquire all outstanding shares of Hillshire at $63.00 each share, totaling $8.55 billion, including Hillshire's outstanding net debt. The offer is valid till the termination of Hillshire and Pinnacle Foods arrangement or Dec 12, 2014, whichever is earlier.

It is worth mentioning here that the Brazilian meatpacking behemoth JBS, which owns Pilgrim's Pride, had unsuccessfully attempted to acquire Hillshire nearly three years back. Investors have been optimistic about the latest bid, and the withdrawal of the offer might after all leave them disappointed.

Following the announcement, the share price of Pilgrim's fell 6.7% to $24.51 on Jun 9, while the share price of Tyson slipped 6.5% to $37.50 on the same day. Hillshire ironically emerged as the gainer with its share price recording a 5.3% increase to $62.06 on Jun 9.

Currently, Pilgrim's Pride sports a Zacks Rank #1 (Strong Buy), while Hillshire Brands holds a Zacks Rank #2 (Buy). Tyson Foods has a Zacks Rank #3 (Hold).

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TYSON FOODS A (TSN): Free Stock Analysis Report

HILLSHIRE BRAND (HSH): Free Stock Analysis Report

PINNACLE FOODS (PF): Free Stock Analysis Report

PILGRIMS PRIDE (PPC): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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