Hillshire withdraws proposal for Pinnacle merger

June 19, 2014
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HillshireCHICAGO — The Hillshire Brands Co. board of directors has agreed unanimously to withdraw its recommendation to acquire Pinnacle Foods Inc. A stockholder vote on the measure is expected by August.

Tyson Foods earlier won a bidding war with Pilgrim’s to acquire Hillshire. That acquisition was contingent on the withdrawal of the Pinnacle proposal by Hillshire.

Hillshire Brands said that its board determined, in consultation with its outside financial and legal advisors, that the Tyson Foods takeover proposal “constitutes a Superior Proposal” over the Pinnacle agreement.

Tyson Foods President Donnie Smith said, “We’re pleased the Hillshire board has withdrawn its recommendation in favor of the Pinnacle Agreement, and now recommends the Tyson Foods offer, all as expressly authorized by the Pinnacle Agreement.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.”

If Pinnacle terminates the merger agreement before a vote of Hillshire’s shareholders, Pinnacle foods may be entitled to receive a termination fee of $163 million. If Pinnacle does not terminate the agreement and instead requires Hillshire’s investors to vote on the transaction and Hillshire stockholders reject it, Hillshire said it would then be entitled to terminate the transaction. Pinnacle may then receive a fee of $43 million followed by an additional $120 million “under certain circumstances.”

Hillshire also pointed out that Hillshire Brands does not yet have the right to terminate the merger agreement with Pinnacle Foods on the basis of the Tyson Foods offer or enter into an agreement with Tyson Foods prior to its termination. “There can be no assurance that any transaction will result from the Tyson Foods offer.”

Meanwhile, the National Farmers Union (NFU) is urging the Department of Justice to halt the planned acquisition of Hillshire Brands by Tyson Foods.

NFU President Roger Johnson issued the following  statement on the possible acquisition.

“Tyson Foods likely purchase of Hillshire benefits corporate owners at the expense of farmers and consumers. Our country is worse off because of the increasingly consolidated food and agriculture marketplace. Farmers and ranchers will have fewer buyers and Tyson will be better able to dictate lower prices paid to producers. Closure of meatpacking and processing facilities, especially in areas where both Tyson and Hillshire are currently operating, will be all but assured.

“I urge the Department of Justice enforce existing anti-trust laws and halt this planned acquisition.”

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