Pilgrim's Pride is offering to buy Hillshire Brands for $45.00 per share in a deal worth $6.4 billion.
Hillshire closed at $37.02 on Friday.
Pilgrim's produces and processes chicken for fast food chains like KFC, Burger King, Popeyes, and Chick-Fil-A. Consumers can also buy the chicken at retailers like Walmart, CostCo, and Kroger.
Hillshire owns well-known brands like Jimmy Dean, Ball Park, and Sara Lee.
"Our proposal creates considerable value for the shareholders of both Pilgrim's and Hillshire," said Pilgrim's CEO Bill Lovette. "For Hillshire shareholders, our proposal provides a substantial premium, greater certainty and immediate cash value for their shares. We have long respected the Hillshire business and we are confident that Hillshire's Board and shareholders will find our all-cash premium proposal to be superior to the pending acquisition of Pinnacle. For Pilgrim's, the addition of Hillshire's portfolio of iconic brands and broad based marketing, innovation and distribution expertise will enhance our position as a market leader. With our complementary products, we believe that together Pilgrim's and Hillshire will better serve our combined customer bases for the benefit of all our stakeholders. We look forward to working constructively with Hillshire to sign a definitive merger agreement and quickly realize the benefits of this combination."
Here's a look at some of the label's that get slapped on Pilgrim's chicken.
On behalf of Pilgrim's Pride Corporation ("PPC"), we are writing to convey our proposal to acquire The Hillshire Brands Company ("Hillshire" or the "Company"). As expressed during our meeting in Chicago on February 20, 2014 we have the utmost respect for Hillshire, its leadership and its employees, and, as you are well aware, it has long been our desire to acquire the Company. We also admire the role that Hillshire has played in the communities it serves, and we would maintain this tradition, making Chicago a major center of North American operations.
Based on our extensive review of the Company, we are prepared to offer $45 per share in cash for all of the outstanding shares of Hillshire common stock. Our proposal values Hillshire at 12.5x its trailing twelve-month adjusted EBITDA as of March 29, 2014, including the $163 million termination fee payable to Pinnacle Foods Inc. ("Pinnacle"). We would assume such fee upon closing.
Section 5.4 of your agreement with Pinnacle explicitly contemplates the Hillshire Board, in the exercise of its fiduciary duties, entering into negotiations and providing diligence if it receives a Superior Proposal, which is defined as a Takeover Proposal that is more favorable to Hillshire's stockholders from a financial point of view than the Pinnacle transaction. A sale of the Company at the price indicated above offers superior value and far greater certainty to Hillshire shareholders than the contemplated Pinnacle transaction.
We are coming forward now because the opportunity for your shareholders to obtain the compelling value represented by our proposal will no longer exist if the proposed acquisition of Pinnacle is consummated. Our offer is therefore conditioned on the termination of this transaction (and our proposed purchase price is not subject to reduction for any related termination fees). In light of the materiality of the proposed transaction and disclosure rules, we plan to announce our proposal publicly.
We intend to finance this all-cash offer through PPC with existing liquidity and new third party financing. The PPC balance sheet as of March 30, 2014 reflected net financial debt of $155 million, including $552 million in cash and cash equivalents, which provides us with ample flexibility to effect an acquisition. Pro forma leverage for PPC would be approximately 4x consolidated 2014E EBITDA, well below the levels you have communicated for the Pinnacle transaction. Based on our strong relationships with all major financial institutions in the U.S. and globally, we expect to finalize binding debt financing commitments promptly.
We have dedicated a full team to the evaluation of Hillshire, including both management and advisors, and have conducted a thorough review of the business and its operations based on publicly available information. In order to finalize our proposal, we would need to complete customary confirmatory due diligence based on non-public information, which we believe could be conducted in parallel with documentation of the transaction without disruption to your business. We have retained the services of Lazard as our financial advisor, and Cravath, Swaine & Moore as our legal counsel, to assist us in consummating this transaction, and PPC has obtained all relevant internal approvals for the delivery of this proposal, including from our Board and our majority shareholder, JBS.
This preliminary proposal is a non-binding indication of interest, which remains subject to the negotiation, execution and delivery of mutually satisfactory definitive agreements, completion of confirmatory due diligence, approval of the transaction by your Board of Directors, receipt of customary approvals and the termination of Hillshire's merger agreement with Pinnacle. Nothing contained in this letter or any resulting communications shall create any legally binding agreements or obligations of any party referred to herein until definitive documentation setting forth such legally binding terms has been negotiated, executed and delivered by the parties.
It is our strong preference to reach a negotiated transaction. Working together, we anticipate being in a position to prepare and execute a definitive agreement within two weeks. In the meantime, we remain at your disposal to address any questions you may have.
Yours sincerely,
/s/
William W. Lovette President and Chief Executive Officer Pilgrim's Pride Corporation
/s/
Wesley M. Batista President and Chief Executive Officer JBS S.A., Majority Shareholder in Pilgrim's Pride Corporation
