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Hillshire Hits 52-Week High on Merger Deal with Tyson

Zacks Equity Research

Shares of meat producer The Hillshire Brands Company (HSH) reached a 52-week high of $62.85 on Jul 9 and eventually closed at $62.80, gaining momentum from the acquisition deal signed with Tyson Foods, Inc. (TSN) on Jul 3.

Per the deal, Tyson Foods will pay $63 per share in cash for all the outstanding shares of Hillshire, valuing the company at approximately $8.55 billion, including debt.

In order to get through with the Tyson deal, Hillshire had to call off its proposed purchase of frozen foods maker Pinnacle Foods, Inc. (PF). Chicago-based Hillshire Brands had proposed to buy Pinnacle Foods for about $6.6 billion on May 12, including debt, in order to diversify its portfolio. (Read: Hillshire to Buy Pinnacle Foods for $6.6B). However, two weeks later, Tyson and poultry producer Pilgrim’s Pride Corp. (PPC) engaged in a bidding war to acquire Hillshire. Tyson finally clinched the deal with its offer of $63 per share made on Jun 9.

The deal will be beneficial for Hillshire as it will bring substantial premium and immediate cash benefit for its shareholders. On the other hand, Tyson, which is the largest U.S. meat producer and a leader in the retail sale of prepared foods, will be able to expand its portfolio with Hillshire’s top meat brands like Jimmy Dean sausages and Ball Park hot dogs, which would make Tyson the industry leader in chicken production. Tyson's acquisition of Hillshire is expected to close by Sep 27 this year.

While Hillshire Brands carries a Zacks Rank #2 (Buy), both Pinnacle Foods and Tyson have a Zacks Rank #3 (Hold).

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