How hot could Hillshire get?

Photo illustration by Joe Raedle/Getty Images

The food fight over Chicago’s Hillshire Brands is getting richer and may be just the beginning, analysts say.

Tyson Foods on Thursday offered a higher bid — $6.1 billion, or $50 a share — for Hillshire, the owner of Jimmy Dean sausages and Ball Park hot dogs, just two days after rival Pilgrim’s Pride made its own unsolicited offer valued at $5.5 billion, or $45 a share.

Both offers aim to knock out Hillshire Brand’s plans, announced less than three weeks ago, to acquire packaged-foods company Pinnacle Foods for $4.3 billion.

The food fight shows that big U.S. companies that depend on competitively priced commodity foods such as chicken, beef and pork are keen to use today’s cheap debt to acquire more profitable branded packaged foods, analysts said Thursday.

A big company could enjoy greater influence over grocery stores if it sells a highly sought-after brand such as Jimmy Dean, in addition to standard-fare chicken and meat, for example, said Morningstar analyst Liang Feng.

Another factor is tight meat supplies worldwide, said Gimme Credit analyst Vicki Bryan.

Tyson Foods, based in Springdale, Ark., is the nation’s largest U.S. meat processor by sales and a major supplier to McDonald’s, Burger King, Wendy’s and other fast-food restaurants.

Tyson Foods has three locations in the Chicago area that employ about 900 people. They include:

• The Bruss Co., 3548 N. Kostner Ave., produces steaks and chops for the restaurant industry. Employs 300.
• Our Chicago Hospitality plant, 4201 S. Ashland Ave., employs 570 people and makes various prepared foods for restaurants and food-service companies.
• A sales office at 2170 Point Blvd. in Elgin employs 12 people.

Tyson Foods President and CEO Donnie Smith told analysts Thursday that “we are committed to maintaining a presence in Chicago, where we already have prepared foods production facilities.

“I’d also like to say we have a great deal of admiration for Hillshire’s marketing ability and hope to maximize their talent within the Tyson Foods organization,” he said.

Analysts say the question now is which potential buyer can better afford the deal, and whether other bidders — most likely companies based in Asia — will jump in.

Tyson Foods has a higher market capitalization than Pilgrim’s Pride and could more easily swallow Hillshire Brands, analysts said.

Gimme Credit’s Bryan said Thursday that other companies, particularly those in Asia, may still enter the bidding wars in the intensely hot market.