The Hillshire Brands Co. has announced that its board of directors has unanimously determined to withdraw its recommendation of the pending acquisition of Pinnacle Foods Inc. In light of the previously disclosed $63.00 per share all-cash unilaterally-binding proposal from Tyson Foods Inc. to acquire Hillshire Brands, and after consultation with outside legal counsel, the Hillshire Brands board in good faith determined that it would be inconsistent with their duties as directors of Hillshire Brands to fail to withdraw its recommendation of the Pinnacle Foods acquisition. The Hillshire Brands board now recommends a vote against the Pinnacle Foods transaction.
The Hillshire Brands board determined, in consultation with its outside financial and legal advisors, that the Tyson Foods takeover proposal constitutes a Superior Proposal as contemplated by the merger agreement with Pinnacle Foods. That determination means in general terms that the board has determined that the Tyson Foods proposal would, if consummated, result in a transaction that is more favorable to its stockholders from a financial point of view than the Pinnacle Foods acquisition. In accordance with the terms of the Pinnacle Foods agreement, on June 9, 2014, the Hillshire Brands board provided written notice to the board of Pinnacle Foods that it intended to change its recommendation. Upon receipt of that notification, under the terms of the merger agreement with Pinnacle Foods, Pinnacle Foods could propose changes to the merger agreement such that the Tyson Foods offer would no longer constitute a Superior Proposal. Pinnacle Foods made no such proposal.
Under the terms of the merger agreement with Pinnacle Foods, as a result of this change in recommendation, Pinnacle Foods may terminate the merger agreement. The merger agreement provides that if Pinnacle Foods terminates the merger agreement prior to a vote of Hillshire Brands stockholders, Pinnacle Foods may be entitled to receive a termination fee in the amount of $163 million. If Pinnacle Foods elects not to terminate the merger agreement and instead requires Hillshire Brands stockholders to vote on the Pinnacle Foods transaction, and Hillshire Brands stockholders vote to reject it, Hillshire Brands will then be entitled to terminate the merger agreement with Pinnacle Foods, and Pinnacle Foods may be entitled to receive a termination fee in the amount of $43 million followed by an additional $120 million under certain circumstances. Hillshire Brands expects to hold its stockholder meeting as early as August.
Hillshire Brands will also have the right to terminate the merger agreement on Dec. 12, 2014, regardless of whether a vote of its stockholders on the Pinnacle Foods merger has taken place by that date. Tyson Foods has announced that its offer will be held open until Dec. 12, 2014.
Hillshire Brands does not yet have the right to terminate the merger agreement with Pinnacle Foods on the basis of the Tyson Foods offer or enter into an agreement with Tyson Foods prior to its termination. There can be no assurance that any transaction will result from the Tyson Foods offer.