May 27, 2014

Pilgrim’s Pride, a top U.S. chicken producer has announced an unsolicited $6.39 billion takeover bid for Hillshire Brands as part of a plan to develop a ‘leading branded’ meat group.  If pursued, the deal would create an animal protein giant with combined sales of $12.4 billion, however it would also mean that Hillshire would be required to walk away from its takeover of packaged food group Pinnacle Foods which was floated last year by private equity firm Blackstone Group.  Because of this, Pilgrim Pride’s $6.39 billion offer includes a $163 million break-fee for the Pinnacle deal besides net debt of $553 million representing a substantial 22% premium to the level shares closed at on Friday May 23^rd.  JBS, which owns 68% of Pilgrim’s Pride stated that the acquisition of Hillshire Brands will fit with the company’s goal of expanding its presence in the branded meats sector which offers higher margins that commodity products.

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