US: Pinnacle to cut debt with Hillshire termination fee
Pinnacle bows out of Hillshire agreement
The US food group released Hillshire from its proposed takeover late yesterday, leaving the way clear for its once would-be buyer to itself be sold to Tyson Foods.
Under the terms of their agreement, Hillshire will pay Pinnacle US$163m. Pinnacle will use the proceeds to pay down debt. As a result, interest expenses for the current fiscal year is expected to fall "slightly below" the US$100m previously disclosed. Interest savings in fiscal 2014 will be reinvested in the business, Pinnacle said.
"The termination payment provides us with increased optionality in executing our strategy," CEO Bob Gamgort said.
The company has focused on a strategy of "reinvigorating iconic brands" such as Birds Eye through investment in innovation and brand building. "We continue to manage well through the difficult industry and category environment that we have discussed previously," Gamgort added.
The scrapping of the agreement paves the way for US meat giant Tyson Foods to buy Hillshire.
Hillshire's move for Pinnacle sparked a bidding war for the Jimmy Dean sausage maker itself between Tyson and another US meat processor Pilgrim's Pride.
Three weeks ago, Tyson submitted a US$8.55bn bid for Hillshire, prompting Pilgrim's to quit the race. A week later, Hillshire's board withdrew its support to buy Pinnacle and said a sale to Tyson would "result in a transaction that is more favorable to its stockholders from a financial point of view".
Hillshire said yesterday it could confirm Pinnacle had terminated the agreement and added: "Consistent with its duties, the Hillshire Brands board will promptly review the Tyson offer."
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