Pilgrim's Pride underlined the "considerable" benefits from
a takeover of Hillshire Brands as the US chicken group upped its bid by $1.3bn,
topping a rival offer from Tyson Foods.
Pilgrim's Pride estimated at more than $300m the annual savings
in operational and "value chain" costs it could obtain from merging its
operations with those of Hillshire Brands, and stripping out, for example,
There were also "significant growth opportunities" to be
reaped, in both the home North American market and abroad, from the market for
higher-margin branded foods.
The Colorado-based group said that it was "confident the
transaction is strategically and financially compelling, and creates
considerable value for the shareholders of both Pilgrim's and Hillshire".
'Rapidly pay down debt'
The comments came as Pilgrim's Pride raised by $1.3bn to
$7.7bn, including debt, its offer for Hillshire Brands, the rump of Sara Lee
Corporation, and owner of brands such as Jimmy Dean sausages, Ball Park
frankfurters and Gallo salami.
The raised offer is equivalent to $55.00 per share, an upgrade
of $10.00 per share on the company's initial bid, and trumping an offer from rival Tyson Foods by $5.00 per share.
Although the raised offer would mean an increased debt
burden for Pilgrim's Pride and for JBS, the Brazil-based meat giant which is
its major shareholder with a 75% stake, the period of high leverage would be
"Pilgrim's expects the increased cash flow from the combined
company and the realisation of synergies will allow it to rapidly pay down the
initial acquisition debt," the company said.
Nonetheless, the immediate market impact was to send shares
in JBS, which had been trumpeting plans to reduce its debts, down 3.5% to
R$7.41 in early deals in Sao Paulo.
Pilgrim's Pride shares eased 0.8% to $25.70, while those in Hillshire Brands soared 8.6% to $58.18, above Tuesday's offer, implying that investors believe that the bidding war has at least one further round to go.
Tyson Foods shares fell 1.0% to $42.95.
Hillshire holds firm
Separately, Hillshire Brands on Tuesday said that it had
opened talks with both Pilgrim's Pride and Tyson Foods over their approaches.
However, Hillshire Brands stood by its own acquisition
plans, to buy Pinnacle Foods, the Bird's Eye vegetables-to- Aunt Jemima pancake
Hillshire said it was "not withdrawing, modifying,
withholding or qualifying its support" for the takeover of Pinnacle Foods, nor "proposing
to do so", and was not making any recommendation regarding either the Pilgrim's
Pride or Tyson Foods proposals.
In fact, Hillshire Brands said that it did not "have the
right to terminate" its merger with Pinnacle Foods.