Meat market

M & A activity picks up in meat industry

JBS SA, the world’s largest meat producer, made an unsolicited $5.6 billion bid for Hillshire Brands Co., seeking to expand its sausage lineup and derail the company’s acquisition of Pinnacle Foods Inc.

JBS’s Pilgrim’s Pride Corp. unit offered $45 a share, it said in a statement today. The deal is contingent on Chicago- based Hillshire scrapping its $4.3 billion agreement to acquire Pinnacle. Pilgrim’s said it met with Hillshire in February and that it “has long been our desire to acquire the company.”

Brazil’s JBS, which spent $17 billion on acquisitions in the past decade to overtake Tyson Foods Inc. in the meat industry, is resuming its takeover campaign less than a year after its last major deal. JBS Chief Executive Officer Wesley Batista said last week in an interview with Bloomberg News that his company will keep expanding via more purchases as opportunities arise. In the U.S., JBS bought Smithfield Foods Inc.’s beef-packing business in 2008 and gained control of chicken processor Pilgrim’s the following year.

The “Holy Grail” for JBS “is to have exposure to all three segments of meat: Poultry, beef and pork,” Ken Shea, an analyst for Bloomberg Industries in Skillman, New Jersey, said by phone. “Today’s unsolicited bid, if effected, would give JBS the third leg of a stool -- a big piece of the pork market.”

Hillshire said in a statement that it will review the Pilgrim’s offer and that it believes in the merits of the Pinnacle deal.

Aggressive Savings

Pilgrim’s hadn’t made an offer until now because it was focused on improving its operations and paying down debt, a person familiar with the company’s thinking said. That has now put Pilgrim’s in a position to offer an all-cash deal, said the person, who asked not to be identified because the discussions were private.

Pilgrim’s and JBS were puzzled by Hillshire’s agreement to buy Pinnacle because they believed the deal’s promised cost savings were aggressive -- especially considering Pinnacle’s private-equity owners had already made cuts, according to the person. Hillshire’s board created an opening for Pilgrim’s in the Pinnacle agreement by inviting offers for all of Hillshire, the person said.

“We are coming forward now because the opportunity for your shareholders to obtain the compelling value represented by our proposal will no longer exist if the proposed acquisition of Pinnacle is consummated,” JBS’s Batista and Pilgrim’s CEO Bill Lovette said in a letter to Hillshire, a copy of which was included in today’s statement.

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