Chicken producer Pilgrim's Pride is offering to acquire fellow meat maker Hillshire Brands to create a "protein-focused" company in a deal worth $5.58 billion.
The offer is contingent on Hillshire scrapping its plan to buy Pinnacle Foods, which makes Birds Eye frozen vegetables, Duncan Hines cake mixes and Hungry Man frozen dinners. Hillshire, which makes its namesake lunchmeats, Ball Park hot dogs and Jimmy Dean sausages, announced the $4.23 billion deal earlier this month as a way to expand into different parts of the supermarket.
But Pilgrim's Pride says its offer of $45 per share for Hillshire is a "substantially superior" alternative that would allow the companies to cut costs by merging some operations. It also said the deal would lead to growth opportunities in more profitable branded products.
Pilgrim's Pride, which is majority-owned by Brazilian meat company JBS, sells fresh and frozen chicken. Hillshire has recently been expanding into higher-profit packaged foods, such as its Jimmy Dean frozen breakfast sandwiches.
A representative for Hillshire didn't respond to a request for comment. Its shares jumped 21 percent to $44.89 in morning trading.
Pilgrim's Pride's offer represents a 24 percent premium to Hillshire's closing price Friday of $36.23. Hillshire has 124 million shares outstanding, according to SEC filings. Pilgrim's Pride values the deal at $6.4 billion, when debt is included.
In a letter to Hillshire CEO Sean Connolly, Pilgrim's Pride noted that Hillshire's deal with Pinnacle includes the consideration of a "superior proposal" that might be more favorable to Hillshire stockholders. Some have questioned the value of Hillshire's acquisition of Pinnacle, noting that many of Pinnacle's brands have faced weak sales growth.
Pilgrim's said its acquisition offer would create a company with an attractive portfolio of meat brands, including Pierce, Wing Dings, Jimmy Dean, Hillshire Farm, Ball Park and State Fair.
Pilgrim's Pride says the deal could close in the third quarter of 2014 if Hillshire terminates its deal with Pinnacle. Pilgrim's said it will pay the $163 million termination fee required to end the Hillshire deal with Pinnacle Foods.
Pinnacle shares fell 7 percent to $30.93 in premarket trading Tuesday.
Pilgrim's Pride said it will finance its deal with cash on hand and new debt.