Updated from 11:56 a.m. ET to include analyst comments, afternoon share prices.
NEW YORK (TheStreet) -- Don't think Blackstone Group (BX), the majority owner of Pinnacle Foods (PF), was surprised by Pilgrim's Pride's (PPC) interest in buying Hillshire Brands (HSH), potentially nixing a $6.6 billion deal takeover of Pinnacle by Hillshire that was announced on May 12.
Differing termination fees paid to Pinnacle Foods in the event Hillshire Brands wasn't able to acquire the company signals it was aware a suitor might emerge for Hillshire. That knowledge of a potential bid indicates Pinnacle shareholders may be overreacting to Pilgrim's Pride unsolicited offer to buy Hillshire Brands for $6.4 billion, disclosed on Tuesday morning.
Pinnacle Foods shares were falling nearly 7% in late Tuesday trading, while Hillshire Brands shares were rising over 22% to $45.39. Pilgrim's Pride shares were rising over 1% in afternoon trading to $25.49 as a result of its all-cash offer, trimming some early trading gains.
Two Term Fees
Pinnacle was poised to receive $43 million if Hillshire shareholders didn't support the May 12 merger and $163 million if a suitor emerged for Hillshire. Those two separate termination fees -- one in the event Hillshire shareholders hated the Pinnacle merger and one in the event Hillshire became a takeover target -- were slightly unusual.
However, Pilgrim's Pride's decision to unveil a $45 a share unsolicited premilinary proposal for Hillshire Brands on Tuesday explains the dual termination fees paid to Pinnacle Foods, which continued to count Blackstone Group as a controlling shareholder after its April 2013 initial public offering.
In fact, Blackstone and Pinnacle Foods were likely aware that Pilgrim's Pride was interested in buying Hillshire Brands when they negotiated the May 12 transaction. Pilgrim's Pride said in its proposal for Hillshire Brands it had met with the company's management about a possible transaction on February 20th.