Hillshire dumps Pinnacle, raising Tyson deal hopes

Tyson Foods moved another step nearer success in its $8.55bn attempt for a "huge leap forward" in prepared food when acquisition target Hillshire Brands ditched its own plans for a takeover which represent the last hurdle to a deal.

Hillshire Brands, owner of names such as Sara Lee desserts and Jimmy Dean sausages, said that it was withdrawing its recommendation made a month ago for a takeover of Pinnacle Foods, the company behind brands such as Aunt Jemima and Birds Eye.

The move follows Tyson Foods' upgrade to $63 a share last week in its offer for Hillshire Brands - a proposal which prompted the withdrawal of Pilgrim's Pride, the US chicken group controlled by Brazil's JBS, the world's top meatpacker.

Hillshire Brands board members said that "it would be inconsistent with their duties as directors" if they failed to back a withdrawal from the Pinnacle Foods deal in favour of the Tyson Foods tie-up.

"The Tyson Foods proposal would, if consummated, result in a transaction that is more favourable to its stockholders from a financial point of view than the Pinnacle Foods acquisition."

'Superior proposal'

Donnie Smith, the Tyson Foods chief executive, said that the group was "pleased" by the decision of the Hillshire Brands board.

"We believe our offer to acquire Hillshire Brands for $63 per share in cash is a superior proposal for Hillshire Brands shareholders," Mr Smith said.

However, Tyson has yet seal the deal, with Hillshire Brands unable to agree a takeover until Pinnacle Foods accepts the deal's collapse, with a $163m break fee, or it is voted against at a Hillshire shareholders' meeting, a move which would also trigger the payment of a, potentially lower, fee.

"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," Mr Smith said.

Market reaction

Hillshire Brands, which said that it expected to hold a shareholder meeting "as early as August", added that it had offered Pinnacle Foods the chance to improve the terms of its deals - presumably through accepting a lower price.

"Pinnacle Foods made no such proposal," Chicago-based Hillshire Brands said.

The impact on shares in the groups, which are all listed in New York, was to send Hillshire Brands stocks up 0.2% to $61.92.

Tyson Foods shares fell 0.8% to $35.14, while Pinnacle Foods stocks eased 0.2% to $32.98.

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