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What: For the second time this week, shares of The Hillshire Brands Company (NYSE:HSH) were bulking up, gaining as much as 18% after Tyson Foods (NYSE:TSN) offered to buy the company for $6.8 billion.
So what: Tyson's bid comes two days after rival Pilgrim's Pride had offered to acquire the meat producer for $6.4 billion, and shares of Tyson were up 6% on the news, a sign that investors see the deal as beneficial to both companies. Tyson's offer values Hillshire Brands at $50 per share, but the stock was trading north of $52, meaning investors expect a potential bidding war between the two suitors for the parent of brands including Jimmy Dean sausages.
Now what: In a brief response, Hillshire management said that it will "thoroughly review the proposal," which was unsolicited. Like Pilgrim's Pride's offer, Tyson's proposal is all cash, and its press release said the combination was a "significantly superior alternative" to Hillshire's previously announced buyout of Pinnacle Foods, which would be terminated if the Tyson offer goes through. Tyson CEO Donnie Smith also said, "There is a strong, strategic, financial, and operational rationale for the combination (of the two companies)," and Hillshire would give Tyson greater access to the branded products market. It is unclear if Pilgrim's Pride will provide a counteroffer, which could send Hillshire shares up even higher. The stock is already up nearly 50% on the week on the two buyout offers.
Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.