Tyson's $6.8 Billion Bid For Hillshire Could Spark Bidding War

Tyson Foods Inc. (NYSE:TSN) has offered to buy Hillshire Brands Co. (NYSE:HSH) for $6.8 billion, upstaging Pilgrim's Pride Corp.'s $6.4-billion bid and signaling a high-stakes food fight for the seller of Hillshire and Jimmy Dean sausages.

The $50-per-share offer Thursday by Tyson, the biggest U.S. meat processor, outshone Pilgrim's (NASDAQ:PPC) $45-a-share all-cash bid earlier this week. Both include the assumption of Hillshire's debt.

Investors lauded the news, sending Hillshire's shares up more than 16 percent to $52.12 in midday trading, above Tyson's offer price, suggesting that some investors expect the latest overture to spark a bidding war.

Earlier in May, Hillshire said it planned to buy Pinnacle Foods Inc. (NYSE:PF), known for its Birds Eye frozen vegetables, in a deal valued at $4.3 billion. That pact, considered less appealing by some investors and analysts, could be in peril as the offers from Tyson and Pilgrim's require Hillshire to terminate the Pinnacle bid.

Tyson's prepared foods business is focused mainly on food service and private label products, and executives said the deal would help it expand into branded products, an area in which Hillshire has strength.

Tyson said its $6.8 billion offer was based on roughly 125 million Hillshire shares outstanding and the assumption of about $500 million in Hillshire debt.

Hillshire was not immediately available for comment.

Tyson reported weaker-than-expected quarterly profit earlier this month as high beef prices spurred consumers to switch to lower-cost chicken. It was also hit by weak sales in China.

The company said it had secured financing from Morgan Stanley Senior Funding Inc. for the deal, which is expected to contribute to its earnings in the first year after completion.

Shares of Tyson were up nearly 7 percent at $43.37, while Pilgrim's stock fell 1.5 percent to $24.99. Pinnacle shares were up 1.5 percent at $31.85.