Tyson Foods, Inc. (TSN) has finally received the nod from the Antitrust Division of the Department of Justice to purchase packaged meat producer, The Hillshire Brands Company (HSH) for $8.55 million. In order to get the approval, Tyson had to agree to divest its Heinold Hog Markets unit, as per a deal with the Department of Justice.
Heinold Hog Markets is a unit of Tyson Hog Markets and buys aged hogs from independent pig farmers for sale to sausage and other meat processors. Hillshire purchases hogs from them to make sausages for its Jimmy Dean and Hillshire Farm brands. The combined companies account for more than one-third of sow purchases in the country. Had the division not been agreed to be sold, Tyson, after the merger, would have had the power to push down the prices paid to hog farmers, per the media reports.
Hence, the government required Tyson to divest the hog purchasing business in order to ensure healthy competition among hog breeders in the U.S. while selling sows. Both the companies have agreed to operate it as an independent business until a buyer for the division is found.
Tyson Foods had formally struck a deal with Hillshire Brands on Jul 2, after a long fought bidding war with poultry producer Pilgrim’s Pride Corp. (PPC). Per the deal, Tyson Foods will pay $63 per share in cash for all the outstanding shares of Hillshire, valuing the company at approximately $8.55 billion, including debt.
However, for the transaction to go through, Hillshire had to terminate its deal to buy frozen foods maker Pinnacle Foods, Inc. (PF). Chicago-based Hillshire Brands had proposed to buy Pinnacle Foods for about $6.6 billion on May 12, including debt, in order to diversify its portfolio. (Read: Hillshire to Buy Pinnacle Foods for $6.6B).
Both Hillshire and Tyson have a Zacks Rank #3 (Hold).
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