Why Pinnacle Foods (PF) Battle With Hillshire Brands (HSH) May Delay Tyson Foods (TSN) Deal

NEW YORK (TheStreet) -- Pinnacle Foods Inc. (PF) is considering options to hold Hillshire Brands (HSH) to its agreement or secure more money in exchange for agreeing to terminate its deal, sources told the Wall Street Journal.

Pinnacle's $4.3 billion sale to Hillshire, announced in May, is unlikely to proceed after Tyson Foods (TSN) agreed to buy Hillshire for $7.7 billion.

The deal gave Hillshire maneuverability in the event of a better deal proposal for itself, and included a $163 million breakup fee for Pinnacle were the agreement to be terminated, the Journal noted.

Now, any arguments about its rights under its agreement with Hillshire could ultimately be pursued as leverage in a settlement, the Journal said.

Tyson's deal for Hillshire is contingent on the Pinnacle deal being terminated.

Hillshire privately notified Pinnacle earlier this week that it doesn't plan to recommend the Pinnacle acquisition to its shareholders, sources told the Journal.

For now, according to Hillshire, the deal with Tyson has not been offically approved by its board.

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TheStreet Ratings team rates PINNACLE FOODS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate PINNACLE FOODS INC (PF) 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, good cash flow from operations and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, generally higher debt management risk and poor profit margins."

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