“We continue to strongly believe in the strategic merits and value creation potential provided by the proposed transaction with Pinnacle Foods,” Hillshire Brands said in a statement. “Consistent with its fiduciary duties, and in consultation with its independent financial and legal advisers, Hillshire Brands’ board will thoroughly review the Pilgrim’s Pride proposal.”
A report issued by JP Morgan shortly after Pilgrim’s Pride’s bid was announced supported the merger between two protein companies vs. a protein and a center of the store company with a focus in the frozen vegetable segment.
“From a financial basis, we think PPC-HSH would bring many more synergies than would HSH-PF, primarily because putting two meat companies together likely would generate sales/marketing efficiencies, back office consolidation, and supply chain benefits,” the JP Morgan report said. “From a strategic basis, our logic is similar: We think joining two protein companies makes a lot more sense than marrying a meat company with one that has a focus on frozen vegetables.”
The JP Morgan analysts speculated other bidders may emerge for Hillshire Brands, noting that there are a variety of commodity-oriented protein companies that may see value in adding a company like Hillshire Brands that has a stable of very strong brands. Three possible suitors mentioned in the analyst brief include Tyson Foods Inc., Cargill and Sanderson Farms Inc.