That’s right, M&A is heating up and surprisingly it’s a packaged meat company that is at the heart of the recent excitement. The action all started a few weeks ago when Hillshire Brands (HSH) announced that it would acquire Pinnacle Foods(PF) at about $36.48 per share. Innocent enough. Sensing an opening though, Pilgrim’s Pride (PPC) unveiled an unsolicited bid for Hillshire, offering a 25% premium to shareholders on the condition that the company drops its bid for Pinnacle. The debate about which option was better for shareholders began in earnest and then…BOOM! Tyson Foods (TSN) jumped into the fray yesterday, offering an even larger premium for Hillshire, but also on the condition that it drops the Pinnacle bid. Hillshire’s share price was recently trading above Tyson’s bid, so it seems like shareholders are expecting even more action, but I will leave this to the merger arbitrage players.
Mario Gabelli, CEO of Gamco, and owner of 4% of HSH (which we highlighted here), said that Hillshire “should encourage the bidding process or allow it to unfold…it’s untenable to move ahead with the Pinnacle Foods deal.” Although it started out as a predator, at this point, it seems likely that Hillshire will ultimately end up as prey. As this WSJ article points out, this turn of events is likely due to the shifting operating environment in the space.
While M&A is fun to watch, in case you have forgotten, Hillshire was formed in a rebranding effort after Sara Lee spun off its coffee business, DE Master Blenders, back in 2012. The coffee company is an interesting story on its own having been acquired last year by privately held JAB. The company is back in the news though with a merger of its own with Mondelez International’s (MDLZ) coffee business(Mondelez itself being a spinoff of Kraft(KFT)), but that deserves its own piece.
Needless to say, with both companies being taken out in less than two years, this spinoff transaction has been a huge success and value driver for Sara Lee shareholders.
Disclosure: Author holds no position in any stock mentioned
