Chicken firm makes offer for Chicago-based Hillshire Brands
BY SANDRA GUY Staff Reporter May 27, 2014 5:54PM
Chicago-based Hillshire Brands, already bidding for another company, is now itself the target of a takeover by Pilgrim’s Pride Co., the country’s second-largest chicken producer. | AP Photo
Updated: June 29, 2014 6:35AM
Hillshire Brands, the Chicago-based owner of Jimmy Dean sausage, Ball Park hot dogs and Sara Lee frozen bakery goods, found itself a takeover target Tuesday, at the same time it is trying to buy another company.
Pilgrim’s Pride Co., the country’s second-largest chicken producer by sales and a major chicken supplier to fast-food chains, made an unsolicited offer Tuesday to buy Hillshire for $45 a share in cash — a 22-percent premium over Hillshire’s closing stock price on Friday. The offer would put the deal at $6.4 billion plus debt, analysts said.
Hillshire, a $4 billion company formerly part of Sara Lee Corp., employs about 600 at its 400 S. Jefferson St. headquarters, plus another 8,400 nationwide.
Pilgrim’s Pride said in a press release that the Greeley, Colo.-based company, whose majority shareholder is Brazilian meat company JBS, “intends to make Chicago a major center of North American operations” if the deal goes through. Pilgrim’s Pride, which owns the Gold Kist Farms and Pierce Chicken brands, reported 2013 revenue of $8.4 billion.
In a conference call, Pilgrim’s Pride CEO Bill Lovette said, “We understand the importance of Hillshire’s heritage and connections with the communities in which it operates.
“We have the utmost respect for Hillshire, its leadership and its employees. We also admire the role that Hillshire has played in the communities it serves, and we intend to maintain this tradition, making Chicago a major center of North American operations.”
JBS also operates Sampco, 651 W. Washington Blvd., a meat products distributor. The company calls the location “strategically important” but would not say how many that location employs.
Hillshire Brands CEO Sean Connollydeclined a request for an interview. The company issued a statement saying it would review Pilgrim’s offer, but still believes in the merits of its proposal to buy Pinnacle Foods for $4.3 billion.
Hillshire’s proposed takeover of Pinnacle, based in Parsippany, N.J., would pair Jimmy Dean sausages and Sara Lee’s frozen desserts with Pinnacle’s Aunt Jemima frozen breakfasts, Vlasic pickles and Birds Eye frozen vegetables.
Connolly has said the takeover of Pinnacle Foods would help Hillshire expand into grocery stores’ packaged foods sections. It’s part of Connolly’s plan to expand Hillshire beyond meats, as he showed by announcing three weeks ago Hillshire’s plan to buy Van’s Natural Foods for $165 million.
Analysts say it’s anyone’s guess what will happen:
• GimmeCredit analyst Vicki Bryan wrote in a note to investors that “key shareholders” at Hillshire are resisting the company’s takeover of Pinnacle, which Bryan called “a chronic laggard.” Bryan believes “odds are good” that Hillshire will drop its bid for Pinnacle and accept an offer from Pilgrim’s Pride.
• J.P. Morgan analyst Ken Goldman speculated in a note to investors that other companies could start throwing their own morsels: Other suitors for Hillshire could include Tyson Foods, Cargill, Kellogg or Sanderson Farms, he wrote.
Goldman noted that the CEO of Cargill, MarcelSmits, was the last CEO of Sara Lee before it split into Hillshire and tea-and-coffee company D.E. Master Blenders.
Shares of Hillshire Brands jumped 22.6 percent to $45.40 when word of the deal broke, and finished the day up 22 percent at $45.19. Pilgrim’s Pride shares were up 1.7 percent at $25.52 after rising higher earlier in the day.