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May 30, 2014

Tyson enters meat brawl

NEW YORK — Hillshire Brands is at the center of a barnyard brawl.

Tyson Foods, the largest U.S. meat processor, on Thursday made a $6.2 billion offer for the maker of Jimmy Dean sausages and Ball Park hot dogs, topping a bid made two days earlier by rival poultry producer Pilgrim’s Pride. Based in Greeley, Colo., Pilgrim’s Pride is owned by Brazilian meat giant JBS.

The takeover bids for Hillshire by the two major meat processors are being driven by the desirability of brand-name processed products like Jimmy Dean breakfast sandwiches. The convenience foods are more profitable than fresh meat, such as chicken breasts, where there isn’t as much wiggle room to pad prices.

Selling more types of products also would give the companies a buffer from volatile price swings of fresh meat. When beef prices rise and shoppers turn to other meats, the companies can sell more chicken or bacon, for example.

While both Tyson and Pilgrim’s sell some prepared products like frozen fried chicken pieces, their main business has been as suppliers of fresh meat for supermarkets and restaurant chains.

Both offers are contingent on Hillshire abandoning its plan to acquire Pinnacle Foods, which makes Birds Eye frozen vegetables and Wish-Bone salad dressings. Hillshire had been trying to diversify its own portfolio by moving into other areas of the supermarket with the $4.23 billion acquisition.

But some investors questioned whether combining with Pinnacle made sense, given the sharp differences in product categories and the outdated image of some Pinnacle brands.

Hillshire said earlier it strongly believes in its deal with Pinnacle Foods but would review Pilgrim’s offer. In its latest statement on Thursday, the Chicago-based company said it would review Tyson’s offer as well and made no mention of its Pinnacle deal.

Pilgrim’s Pride said it is considering its options and will “update the markets in due course,” making no mention of whether it planned to raise its offer. Pinnacle didn’t respond to request for comment.

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