Hillshire Brands (HSH), owner of popular meat brands such as Jimmy Dean and Ball Park, woke up to an enticing offer Tuesday after revealing plans to purchase Pinnacle Foods, Inc. (PF) just a couple of weeks ago. The proposed deal between the two food giants for $4.2 billion dollars was countered by Pilgrim’s Pride Corporation (PPC), which offered Hillshire Brands $6.4 billion—or $45 per share—in cash for the takeover, contingent on Hillshire abandoning its deal with Pinnacle. This represents a heavy premium from HSH’s previous share price and will cost Pilgrim’s Pride an additional $163 MM break-up fee it will cover for HSH if all goes to plan.
Pilgrim’s Pride, the Colorado-based subsidiary of Brazilian food giant JBS, is comfortable doing so as sentiment from its Chief Executive is extremely optimistic. CEO William Lovette said today that the deal, which he hopes to close as soon as Q3 2014 will create a “fully integrated protein leader” (PPC is the largest chicken producer in the US).
Hillshire Brands closed Friday at $37.02 and enjoyed a nice jump at Tuesdays opening bell to $44.75 after the announcement of the proposed deal. HSH has been trading in a 52-week range of $30.35-$45.52 hitting its yearly high Tuesday morning, and up almost 22% YTD.
The proposed acquisition could spell good things for PPC and HSH as both stocks have benefited from the announcement. Pinnacle is wallowing in potential rejection with shares dipping almost 7% today on the news.