Hillshire Brands’ board of directors have recommended the termination of the company’s contract to acquire Pinnacle Foods and move toward the $8.55 billion offer by Tyson Foods.
“In accordance with the terms of the Pinnacle Foods agreement, on June 9, 2014, the Hillshire Brands board provided written notice to the board of Pinnacle Foods that it intended to change its recommendation,” Hillshire Brands said in a statement. “Upon receipt of that notification, under the terms of the merger agreement with Pinnacle Foods, Pinnacle Foods could propose changes to the merger agreement such that the Tyson Foods offer would no longer constitute a superior proposal. Pinnacle Foods made no such proposal.”
Pinnacle Foods stands to earn $163 million in termination fees that Tyson Foods has agreed to cover on behalf of Hillshire Brands. Pinnacle may force Hillshire to take the deal to its shareholders, but analysts do not expect shareholders to approve it, given there is far more value in the Tyson Foods offer.
“We believe our offer to acquire Hillshire Brands for $63 per share in cash is a superior proposal for Hillshire Brands shareholders,” said Donnie Smith, president and CEO of Tyson Foods. “We're pleased the Hillshire Board has withdrawn its recommendation in favor of the Pinnacle Agreement, and now recommends the Tyson Foods offer, all as expressly authorized by the Pinnacle Agreement. 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.”
Hillshire Brands said it expects to hold its stockholder meeting as early as August. Hillshire Brands will also have the right to terminate the merger agreement on Dec. 12, 2014, regardless of whether a vote of its stockholders on the Pinnacle Foods merger has taken place by that date. Tyson Foods has announced that its offer will be held open until Dec. 12, 2014.