NEW YORK (AP) - Pilgrim's Pride launched a takeover bid for Hillshire Brands on Tuesday that would expand its business beyond fresh and frozen chicken into a variety of packaged meats including Ball Park hot dogs and Jimmy Dean sausages.
NEW YORK (AP) — Pilgrim's Pride launched a takeover bid for Hillshire Brands on Tuesday that would expand its business beyond fresh and frozen chicken into a variety of packaged meats including Ball Park hot dogs and Jimmy Dean sausages.
The $5.58 billion offer would derail Hillshire's plans to buy Pinnacle Foods, which makes Birds Eye frozen vegetables, Duncan Hines cake mixes and Hungry Man frozen dinners. Hillshire had announced the $4.23 billion deal earlier this month as a way to expand into different parts of the supermarket.
But Pilgrim's Pride says its offer of $45 per share for Hillshire is a "substantially superior" alternative that would allow the companies to cut costs by merging some operations and become a "protein leader" that sells more types of meat.
"As you are well aware, it has long been our desire to acquire the company," Pilgrim's said in the public letter to Hillshire CEO Sean Connolly.
In a statement, Hillshire said it continues to strongly believe in the "strategic merits and value creation potential" of its deal with Pinnacle Foods. The Chicago-based company said it would review Pilgrim's proposal as part of its fiduciary duties.
Pilgrim's Pride, which is majority-owned by Brazilian meat company JBS, has said it would focus more heavily on branded products, which are more profitable than selling private-label meats to supermarkets and food-service outlets.
Hillshire, which has been struggling with weak sales, has been looking for ways to boost its results, including by focusing on products like its Jimmy Dean breakfast sandwiches that aren't made up entirely of meat. Its shares were up 21 percent to $44.89 in morning trading.
Pilgrim's Pride's offer represents a 24 percent premium to Hillshire's closing price Friday of $36.23. Hillshire has 124 million shares outstanding, according to SEC filings. Pilgrim's Pride values the deal at $6.4 billion, when debt is included.
In a letter to Hillshire, CEO Connolly, Pilgrim's Pride also noted that Hillshire's deal with Pinnacle includes the consideration of a "superior proposal" that might be more favorable to Hillshire stockholders. Some have questioned the value of Hillshire's acquisition of Pinnacle, noting that many of Pinnacle's brands have faced weak sales growth.
Pilgrim's said its offer would create a company with an attractive portfolio of meat brands, including Pierce, Wing Dings, Jimmy Dean, Hillshire Farm, Ball Park and State Fair.
Pilgrim's Pride, based in Greeley, Colorado, says the deal could close in the third quarter of 2014 if Hillshire calls off its deal with Pinnacle. Pilgrim's said it will pay the $163 million termination fee required to end the Hillshire deal with Pinnacle Foods.
Pinnacle didn't respond to request for comment. Its shares fell 7 percent to $30.93 in premarket trading Tuesday.
Pilgrim's Pride said it will finance its deal with cash on hand and new debt.