Hillshire Brands Co.’s pending takeover by Tyson Foods Inc. could mean additional hiring in the Chicago area.
Tyson Foods has won a bidding war to gobble up Chicago-based Hillshire Brands, the maker of Jimmy Dean sausages and Ball Park hot dogs. Tyson beat out rival poultry producer Pilgrim’s Pride with an offer of $63 per share, or about $7.75 billion.
A local analyst says Hillshire Brands might be able to add more jobs here after its acquisition because Tyson values the local company’s innovation and research-and-development expertise, and would likely welcome having an “urban” presence to spur creativity.
“There is not a lot of product overlap — this is not a chicken company buying another chicken company, so I would hope there won’t be a lot of consolidation,” said Neil Stern, senior partner at Chicago-based McMillan Doolittle retail consultancy.
Stern said Tyson wants to develop new products, particularly in fast-growing convenience-foods categories, and has a greater variety of departments in the grocery store — frozen, fresh meats, refrigerated foods, for example — in which to introduce Hillshire products.
“It’s an opportunity for Tyson to expand distribution,” he said.
Biggest food industry deals in Illinois (Chart)
Hillshire Brands goes from buyer to buyout target (Timeline)
Biggest deals involving Illinois companies (Chart)
Dave Novosel, senior analyst at GimmeCredit, said he believes Tyson will also keep intact Hillshire Brands’ local packaging and processing operations. Those are a valuable part of the acquisition, he said.
On the other hand, some Chicago headquarters jobs may be cut in accounting, finance, legal, information technology and human resources departments, as usually happens in consolidations, Novosel said.
Hillshire Foods, a $4 billion company formerly part of Sara Lee Corp., employs about 600 at its 400 S. Jefferson St. headquarters, plus another 8,400 nationwide.
Tyson Foods has three locations in the Chicago area that employ about 900 people:
- 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 and Pilgrim’s Pride finished up the bidding process Sunday, about two weeks after Pilgrim’s Pride made an initial bid of $45 a share. Tyson values the deal at $8.55 billion, including debt. Pilgrim’s Pride, which is owned by Brazilian meat giant JBS, said Monday that it was bowing out of the competition.
Still, the deal is not sealed yet. It is contingent on Hillshire not going through with its offer to acquire Pinnacle Foods Inc., which makes Birds Eye frozen vegetables and Wish-Bone salad dressings. Pinnacle could allow Hillshire to do its deal with Tyson, leaving Pinnacle with a $163 million breakup fee. Or it could force Hillshire shareholders to vote on whether they’d prefer a merger with Pinnacle.
A Pinnacle representative didn’t return a call for comment.
In a conference call with reporters, Tyson CEO Donnie Smith said he was confident the $63 offer would end up being worthwhile for Tyson shareholders, despite how high the price went.
“Great brands like Jimmy Dean and Ball Park just don’t become available very often,” Smith said.
Tyson, like Pilgrim’s Pride, has been looking to boost its presence in brand-name, prepared foods like Jimmy Dean breakfast sandwiches. Those types of products are more profitable than fresh meat, such as chicken breasts, where there isn’t as much wiggle room to pad prices.
While Tyson and Pilgrim’s Pride already sell some brand-name products, their businesses have been more focused on supplying supermarkets and restaurant chains.
In particular, Tyson said it was drawn by Hillshire’s stable of breakfast foods, which would better position it in the fast-growing category.
Tyson also noted the potential for cost savings by combining supply chains, transportation and other operations with Hillshire. But Smith said it was too early to comment on how many jobs could be cut as a result of the deal.
Tyson’s offer will be in place until Dec. 12, the final termination date of the deal with Pinnacle.
Hillshire Brands noted it does not have the right to end the deal with Pinnacle on the basis of the Tyson offer, or enter into an agreement with Tyson before the deal is terminated.
“There can be no assurance that any transaction will result from the Tyson Foods offer,” Hillshire said in a statement.
Hillshire had been trying to diversify its own portfolio by moving into other areas of the supermarket with the $4.23 billion acquisition of Pinnacle. But some investors questioned the wisdom of that deal, given the outdated image of many Pinnacle brands and the differences in the two companies’ product portfolios.
CONTRIBUTING: The Associated Press
A big deal
When completed, Tyson’s $7.75 billion offer for Hillshire Brands will will be among the biggest deals involving an Illinois company in the past 13 years.
Scroll over the chart below to see deals involving Illinois companies since 2000 that have exceeded $1 billion in value, according to data provided by research firm FACTSET:
