Hillshire Brands one step closer to merging with Tyson Foods

by Keith Nunes
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CHICAGO – The board of directors for the Hillshire Brands Co. has recommended terminating the company’s agreement to acquire the Pinnacle Foods Group, Parsippany, NJ, and move forward with being acquired by Tyson Foods, Inc., Springdale, Ark., for approximately $8.5 billion. The ball is now in Pinnacle Foods’ court.

“In accordance with the terms of the Pinnacle Foods agreement, on June 9, 2014, the Hillshire Brands board provided written notice to the board of Pinnacle Foods that it intended to change its recommendation,” Hillshire Brands said in a statement. “Upon receipt of that notification, under the terms of the merger agreement with Pinnacle Foods, Pinnacle Foods could propose changes to the merger agreement such that the Tyson Foods offer would no longer constitute a superior proposal. Pinnacle Foods made no such proposal.”

Under the terms of the agreement with Pinnacle Foods, as a result of the change in the board’s recommendation, Pinnacle Foods may terminate the merger agreement. The agreement provides that if Pinnacle Foods terminates it prior to a vote of Hillshire Brands stockholders, Pinnacle Foods may be entitled to receive a termination fee of $163 million. If Pinnacle Foods elects not to end the merger agreement and requires Hillshire Brands stockholders to vote on the Pinnacle Foods transaction, and Hillshire Brands stockholders vote to reject it, Hillshire Brands would then be entitled to terminate the merger agreement and Pinnacle Foods may be entitled to receive a termination fee of $43 million followed by an additional $120 million under certain circumstances. Tyson Foods is ready to close the deal.

“We believe our offer to acquire Hillshire Brands for $63 per share in cash is a superior proposal for Hillshire Brands shareholders,” said Donnie Smith, president and CEO of Tyson Foods. “We're pleased the Hillshire Board has withdrawn its recommendation in favor of the Pinnacle Agreement, and now recommends the Tyson Foods offer, all as expressly authorized by the Pinnacle Agreement. We hope Pinnacle Foods will promptly accept the termination fee and not delay the ability of Hillshire Brands' shareholders to benefit from Tyson Foods' superior offer.”

Hillshire Brands said it expects to hold its stockholder meeting as early as August. Hillshire Brands will also have the right to terminate the merger agreement on Dec. 12, 2014, regardless of whether a vote of its stockholders on the Pinnacle Foods merger has taken place by that date. Tyson Foods has announced that its offer will be held open until Dec. 12, 2014.
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