Tyson Foods expects to use cash, $8.2 billion bridge facility to acquire Hillshire Farms

By Lisa Kerner

Charlotte, N.C., June 9 – Tyson Foods, Inc. will use cash and a fully committed bridge facility to fund its proposed acquisition of Hillshire Brands Co.

The transaction is valued at $63 per share or a total of $8.55 billion including debt.

“We have a fully committed bridge facility of $8.2 billion from Morgan Stanley [Senior Funding, Inc.] and J.P. Morgan [Securities LLC],” said Tyson president and chief executive officer Donnie Smith during a conference call on Monday.

“Because maintaining our investment-grade credit rating is extremely important to us, we’re prepared to issue debt and equity in a combination that will keep us at investment grade,” Smith said.

“We expect the combined companies to generate considerable cash flow that will allow us to delever quickly; we see attractive long-term interest rates in the credit markets and we expect our weighted average interest cost to be roughly 3½%.”

Hillshire’s financial profile makes sense in terms of accretion and expected returns, said Smith.

“We can delever our balance sheet rather rapidly and fast-forward our growth strategy at the same time,” he said.

Tyson’s offer is subject to Hillshire Brands being released from its existing agreement to acquire Pinnacle Foods Inc. The offer will remain in effect until Dec. 12, the final termination date of the Hillshire Brands/Pinnacle Foods agreement.

“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.

Tyson processes and markets chicken and is based in Springdale, Ark. Hillshire is a Chicago-based convenient foods company.

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