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By James Dennin for Kapitall.Tyson Foods (TSN), the second largest pork producer in America and supplier of the chicken that goes in your
McDonalds (MCD) nuggets,
announced a $6 billion bid today to buy
Hillshire Farms (HSH).
The bid is even larger than the one recently made by
Pilgrims Pride (PPC), also to acquire Hillshire, the maker of Jimmy Dean sausages, among other things.
Tyson seems eager to offset some of the volatility of its food-price driven business. One way to do that is to acquire companies that have valuable and popular brands like Jimmy Dean.
Branded foods have better margins than unbranded foods because the premium they can charge can be used to offset swings in foods prices—something that's grown more consistent lately as irregular weather becomes the new normal.
The deals are contingent on a lot of factors, however. For example, Hillshire Farms
already had an offer bid on the table to buy another company,
Pinnacle Foods (PF). In order to be acquired by Tyson or Pilgrims, the company would have to rescind the offer.
There aren't a lot of large, publicly traded meat producers in the US. Depending on how you measure it the number ranges from six to about ten.
So for almost half of the industry to be making acquisition offers—sometimes at the risk of starting a bidding war—indicates just how strong the pressures to control costs are.
Do you think all four firms will be able to get the mergers they want? Use the list below to begin your analysis and let us know what you think in the comments.
Click on the interactive chart to view data over time. 1. Tyson Foods Inc. (
Financials): Engages in the production, distribution, and marketing of chicken, beef, pork, and prepared food products, as well as related allied products worldwide. Market cap at $15.17B, most recent closing price at $40.75.