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TYSON FOODS TO ACQUIRE HILLSHIRE
Source: Tyson Foods news release

Tyson Foods, Inc. (NYSE: TSN) today announced it has submitted a unilaterally binding offer to acquire all outstanding shares of The Hillshire Brands Company (NYSE: HSH) for a price of $63 per share in cash. The offer is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods Inc. (NYSE: PF) in accordance with the terms thereof.

It follows a bidding process conducted by Hillshire Brands that concluded Sunday, June 8, 2014. The all-cash transaction is valued at approximately $8.55 billion, including Hillshire Brands' outstanding net debt, and represents a multiple of 16.7x trailing 12 months adjusted EBITDA or 10.5x including $300 million in synergies.

"The Hillshire Brands acquisition would represent a defining moment for Tyson Foods," said Donnie Smith, Tyson's president and chief executive officer. "Our strategy has been to grow our prepared foods business, and it has been our aspiration to be a leader in retail prepared foods just as we are in chicken. Now we will have those iconic #1 and #2 brands in numerous categories."

"Tyson Foods has a history of growing through strategic acquisition," said John Tyson, chairman of the board, "It is the view of the board of directors that this is truly a transformational opportunity and one that best fits with our strategic plan while enhancing our margins and creating long-term shareholder value." The Tyson family and the board are prepared to issue shares to maintain the company's investment grade credit rating.

The combination of Tyson and Hillshire Brands would reposition Tyson as a clear leader in the retail sale of prepared foods, with a complementary portfolio of well-recognized brands, including Tyson®, Wright Brand®, Jimmy Dean®, Ball Park®, State Fair® and Hillshire Farm®. In particular, the strength of Hillshire Brands' products in the breakfast category would allow Tyson to capture opportunities in this attractive and fast-growing day part.

"After a disciplined process to identify ways of growing our Prepared Foods segment, we are convinced that combining Tyson and Hillshire Brands would make strategic, financial and operational sense and would stabilize earnings by increasing return on sales and de-commoditizing our business," Smith said.

The transaction would be funded by cash on hand and a fully committed bridge facility from Morgan Stanley Senior Funding, Inc. and JP Morgan Securities LLC. Tyson expects to maintain its investment grade credit rating and is prepared to issue debt and equity as is prudent. Tyson anticipates the substantial cash flow from the combined companies will enable it to rapidly pay down debt.

• Tyson would expect to realize annual synergies in excess of $300 million driven primarily by operational efficiencies, purchasing, distribution, supply chain efficiencies, upgrading raw materials and through the combination of the two companies' talented sales and marketing teams and alignment of shared service functions. Synergies are expected in the first full fiscal year with the total synergies to be realized by the end of year three.

• Tyson's pork processing operations would benefit from stable and consistent demand for its raw materials for use in Hillshire Brands' branded, value-added products.

• Tyson expects that the proposed transaction would be marginally accretive to EPS on a cash basis in the first full fiscal year after completion and substantially accretive thereafter.

The offer was unanimously approved by the Board of Directors of Tyson Foods. The offer will remain in effect until December 12, 2014, the final termination date of the Hillshire Brands/Pinnacle Foods agreement.

If that agreement is terminated in accordance with its terms, Hillshire Brands would be able to accept the offer, with the result that binding definitive agreements could become effective. Any transaction would be subject to regulatory approval and other customary closing conditions.

Morgan Stanley and JP Morgan are acting as financial advisors to Tyson Foods, and Davis Polk & Wardwell LLP is acting as its legal counsel.


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