Pilgrim's bid for Hillshire puts Pinnacle deal in peril
By Lisa Baertlein and Devika Krishna Kumar
(Reuters) - Pilgrim's Pride Corp PPC.O on Tuesday offered to buy Hillshire Brands Co HSH.N in an all-cash deal valued at $6.4 billion, as the world's second-largest chicken processor seeks to expand its protein footprint with Hillshire's sausages and lunch meats.
Shares in Hillshire soared almost 23 percent on word of the bid, which landed two weeks after the maker of Hillshire lunch meats and Jimmy Dean Sausages offered to buy Pinnacle Foods Inc PF.N, known for its Birds Eye frozen vegetables, in a $4.3 billion deal.
Pilgrim's competing overture, which requires Hillshire to drop its Pinnacle bid, also signaled an aggressive return to deal making by Brazilian meatpacking giant JBS SA (JBSS3.SA: Cotización), which owns about 75 percent of Pilgrim's and recently cut its debt.
A buying spree launched in 2005 transformed JBS into the world's biggest beef producer with more than 14 major acquisitions in six years, including U.S. rivals Swift, Smithfield Beef and Pilgrim's Pride.
Growing global appetite for meat also has fueled other big protein deals, including last year's roughly $5 billion acquisition of pork giant Smithfield Foods by China's WH Group Ltd, previously known as Shuanghui International Holdings.
Investors were cool on a Hillshire-Pinnacle marriage and sent shares down roughly 6 percent in intraday trading when the proposal came on May 12.
Under that deal, Hillshire would suspend share buybacks, take on debt of $2.3 billion and expand into areas that are out of synch with U.S. consumers' appetite for fresher food.
J.P. Morgan analyst Ken Goldman in a client note called Pilgrim's offer both strategically and financially superior to the Pinnacle deal. Continuación...