NEW YORK (TheStreet) -- Shares of Hillshire Brands Co. (HSH) are up 4.70% to $61.69 in pre-market trade after it was reported that Tyson Foods Inc. (TSN) is set to buy the food company for $63 per share, or about $7.8 billion excluding debt, beating offers from Pilgrim's Pride Corp. (PPC), the Chicago Tribune reports.
Tyson said the deal is subject to Hillshire being released from its plan to buy Pinnacle Foods Inc. (PF).
Tyson said its new offer, an increase from its initial bid of $50 per share, is valued at about $8.55 billion, including Hillshire's debt.
The all-cash offer comes after a bidding process conducted by Hillshire ended on Sunday, Tyson said.
TheStreet Ratings team rates HILLSHIRE BRANDS CO as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate HILLSHIRE BRANDS CO (HSH) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and good cash flow from operations. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- Despite its growing revenue, the company underperformed as compared with the industry average of 3.7%. Since the same quarter one year prior, revenues slightly increased by 3.4%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Food Products industry and the overall market, HILLSHIRE BRANDS CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Compared to its closing price of one year ago, HSH's share price has jumped by 72.35%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Food Products industry. The net income has significantly decreased by 54.8% when compared to the same quarter one year ago, falling from $93.00 million to $42.00 million.
- Currently the debt-to-equity ratio of 1.57 is quite high overall and when compared to the industry average, suggesting that the current management of debt levels should be re-evaluated. Along with the unfavorable debt-to-equity ratio, HSH maintains a poor quick ratio of 0.81, which illustrates the inability to avoid short-term cash problems.
- You can view the full analysis from the report here: HSH Ratings Report