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Hillshire seeks to end Pinnacle buyout offer

Sausage maker Hillshire Brands announced that it was withdrawing support for an acquisition of Pinnacle Foods after its board instead endorsed a takeover of Hillshire by Tyson Foods.

NEW YORK: Sausage maker Hillshire Brands on Monday announced that it was withdrawing support for an acquisition of Pinnacle Foods after its board instead endorsed a takeover of Hillshire by Tyson Foods.

Hillshire's board of directors concluded US meat giant Tyson's bid, worth US$8.6 billion, represents a "superior" deal to its own US$6.6 billion proposal to buy Pinnacle, which owns Birds Eye frozen vegetables, Duncan Hines cake mixes and Mrs. Butterworth's syrup.

The Tyson bid "is more favourable to (Hillshire's) stockholders from a financial point of view than the Pinnacle Foods acquisition," said Hillshire, maker of Jimmy Dean sausages, Ball Park hot dogs and Sara Lee frozen desserts, in a statement.

The announcement likely clears the way for the Tyson-Hillshire deal, which had been predicated on the annulment of the Hillshire-Pinnacle transaction.

Hillshire's announcement means Pinnacle could potentially receive a US$163 million break-up fee if it agrees to cancel the deal prior to a Hillshire shareholder vote.

Hillshire said it expects to hold its next stockholder meeting in August.

Under the terms of the merger agreement with Pinnacle, Hillshire said it also has the right to terminate the Pinnacle deal on December 12, regardless of whether a Hillshire stockholder vote takes place. Tyson Foods has said its offer for Hillshire will stand until December 12.

Hillshire became enmeshed in a complex takeover battle on May 27, when Brazilian-owned Pilgrim's Pride offered an unsolicited bid to buy Hillshire, throwing the Hillshire-Pinnacle deal into doubt.

Hillshire had eyed Pinnacle as a means to become a bigger player in frozen foods. But Hillshire instead became a prized target for meat companies wanting to build their offerings of sausages and other prepared food as a means to boost profit margins.

Tyson joined the fray May 29, proposing its own bid for Hillshire and ultimately outbidding its Brazilian rival on June 9.

Tyson said on Monday it was "pleased" by the Hillshire announcement.

"We hope Pinnacle Foods will promptly accept the termination fee and not delay the ability of Hillshire Brands's shareholders to benefit from Tyson Foods's superior offer," Tyson said.

In late-morning trade, Hillshire rose 0.2 per cent to US$61.97 and Pinnacle advanced 0.5 per cent to US$33.19, while Tyson dropped 1.0 per cent to US$35.09.

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