UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 27, 2014
PILGRIM'S PRIDE CORPORATION
(Exact name of registrant as specified in charter)
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Delaware
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1-9273
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75-1285071
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(State or Other Jurisdiction of Incorporation)
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(Commission File No.)
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(I.R.S. Employer Identification No.)
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1770 Promontory Circle
Greeley, CO
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80634-9038
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(Address of Principal Executive Offices)
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(Zip Code)
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(970) 506-8000
(Registrant’s telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 7.01
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Regulation FD Disclosure
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Attached hereto as Exhibit 99.1 is a press release issued by the Company on May 27, 2014.
Also attached hereto as Exhibit 99.2 is a presentation referenced during the Company’s analyst and investor conference call on May 27, 2014.
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Item 9.01
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Financial Statements and Exhibits
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(d)
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Exhibits.
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Exhibit No.
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Description
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| 99.1 | Press Release issued by the Company on May 27, 2014 | |
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99.2
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Presentation referenced during the Company’s analyst and investor conference call on May 27, 2014
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| PILGRIM'S PRIDE CORPORATION | |||
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Date: May 27, 2014
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By:
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/s/ Fabio Sandri | |
| Name: Fabio Sandri | |||
| Title: Chief Financial Officer | |||
EXHIBIT INDEX
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Exhibit No.
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Description
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| 99.1 | Press Release issued by the Company on May 27, 2014 | |
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99.2
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Presentation referenced during the Company’s analyst and investor conference call on May 27, 2014
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Exhibit 99.1
For Immediate Release
PILGRIM’S PRIDE PROPOSES TO ACQUIRE HILLSHIRE BRANDS
FOR $45.00 PER SHARE IN CASH
Proposal Provides Attractive Valuation for Hillshire and Immediate Cash Value for Hillshire Shareholders
Represents a Superior Proposal for Hillshire Shareholders Compared to
Hillshire’s Planned Acquisition of Pinnacle Foods
Creates Fully Integrated Branded Protein Leader with
Combined Sales of $12.4 Billion Across Broad Portfolio of Brands
GREELEY, Colo., May 27, 2014 – Pilgrim’s Pride Corporation (Nasdaq: PPC) (“Pilgrim’s”) today announced that it has made a proposal to acquire The Hillshire Brands Company (“Hillshire”) (NYSE: HSH) for $45.00 per share in cash, in a transaction valued at $6.4 billion.
Pilgrim’s all-cash proposal provides Hillshire shareholders with a substantially superior alternative to Hillshire’s pending acquisition of Pinnacle Foods Inc. (“Pinnacle”) (NYSE: PF), representing a 25% premium to the volume weighted average price of Hillshire shares over the 10 trading days following the announcement of the Pinnacle transaction. Further, the transaction represents a compelling value to Hillshire shareholders at 12.5x Hillshire’s trailing adjusted EBITDA, including the $163 million termination fee payable to Pinnacle.
The proposal has the unanimous support of the Board of Directors of Pilgrim’s, as well as the support of JBS S.A., the majority owner of Pilgrim's. It is anticipated that the proposed transaction would close in the third quarter of 2014 and would be subject to customary closing conditions and the termination of Hillshire’s merger agreement with Pinnacle. Pilgrim’s expects to finance the acquisition with a combination of existing cash balances and new debt financing.
The transaction would create a leading branded, protein-focused company with strong, consistent earnings and complementary competencies:
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Strong Financial Profile: Together, the companies would have LTM combined revenues of $12.4 billion and EBITDA of $1.4 billion.
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Diversified and Complementary Product Portfolios and Customer Bases:
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An attractive portfolio of Pilgrim’s and Hillshire brands, including Pierce, Wing Dings, Jimmy Dean, Hillshire Farm, Ball Park and State Fair – all of which are number one or number two in their respective markets.
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Pilgrim’s strong operational efficiency systems and processes align with Hillshire’s innovation and marketing capabilities.
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Complementary channels with shared culture of partnering with customers – Pilgrim’s expertise in food service brand and supermarket deli and Hillshire’s experience in retail.
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Strong Synergy and Growth Opportunities: Pilgrim’s expects cost synergies to come from operational and value-chain efficiencies and significant growth opportunities in higher margin branded products, both in North America and internationally.
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Maintaining Hillshire’s Presence in Chicago: Appreciating the importance of Hillshire’s heritage and connections with the communities in which it operates, Pilgrim’s intends to make Chicago a major center of North American operations.
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"Our proposal creates considerable value for the shareholders of both Pilgrim’s and Hillshire," said Bill Lovette, Pilgrim’s Chief Executive Officer. "For Hillshire shareholders, our proposal provides a substantial premium, greater certainty and immediate cash value for their shares. We have long respected the Hillshire business and we are confident that Hillshire’s Board and shareholders will find our all-cash premium proposal to be superior to the pending acquisition of Pinnacle. For Pilgrim’s, the addition of Hillshire’s portfolio of iconic brands and broad based marketing, innovation and distribution expertise will enhance our position as a market leader. With our complementary products, we believe that together Pilgrim’s and Hillshire will better serve our combined customer bases for the benefit of all our stakeholders. We look forward to working constructively with Hillshire to sign a definitive merger agreement and quickly realize the benefits of this combination."
Lazard is acting as financial advisor to Pilgrim’s and Cravath, Swaine & Moore LLP is acting as its legal counsel.
Below is the text of the letter that was sent to Sean Connolly, Hillshire’s President and Chief Executive Officer, today:
May 27, 2014
Mr. Sean Connolly
President and Chief Executive Officer
The Hillshire Brands Company
400 South Jefferson Street
Chicago, IL 60607
Dear Sean,
On behalf of Pilgrim’s Pride Corporation (“PPC”), we are writing to convey our proposal to acquire The Hillshire Brands Company (“Hillshire” or the “Company”). As expressed during our meeting in Chicago on February 20, 2014 we have the utmost respect for Hillshire, its leadership and its employees, and, as you are well aware, it has long been our desire to acquire the Company. We also admire the role that Hillshire has played in the communities it serves, and we would maintain this tradition, making Chicago a major center of North American operations.
Based on our extensive review of the Company, we are prepared to offer $45 per share in cash for all of the outstanding shares of Hillshire common stock. Our proposal values Hillshire at 12.5x its trailing twelve-month adjusted EBITDA as of March 29, 2014, including the $163 million termination fee payable to Pinnacle Foods Inc. (“Pinnacle”). We would assume such fee upon closing.
Section 5.4 of your agreement with Pinnacle explicitly contemplates the Hillshire Board, in the exercise of its fiduciary duties, entering into negotiations and providing diligence if it receives a Superior Proposal, which is defined as a Takeover Proposal that is more favorable to Hillshire’s stockholders from a financial point of view than the Pinnacle transaction. A sale of the Company at the price indicated above offers superior value and far greater certainty to Hillshire shareholders than the contemplated Pinnacle transaction.
We are coming forward now because the opportunity for your shareholders to obtain the compelling value represented by our proposal will no longer exist if the proposed acquisition of Pinnacle is consummated. Our offer is therefore conditioned on the termination of this transaction (and our proposed purchase price is not subject to reduction for any related termination fees). In light of the materiality of the proposed transaction and disclosure rules, we plan to announce our proposal publicly.
We intend to finance this all-cash offer through PPC with existing liquidity and new third party financing. The PPC balance sheet as of March 30, 2014 reflected net financial debt of $155 million, including $552 million in cash and cash equivalents, which provides us with ample flexibility to effect an acquisition. Pro forma leverage for PPC would be approximately 4x consolidated 2014E EBITDA, well below the levels you have communicated for the Pinnacle transaction. Based on our strong relationships with all major financial institutions in the U.S. and globally, we expect to finalize binding debt financing commitments promptly.
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We have dedicated a full team to the evaluation of Hillshire, including both management and advisors, and have conducted a thorough review of the business and its operations based on publicly available information. In order to finalize our proposal, we would need to complete customary confirmatory due diligence based on non-public information, which we believe could be conducted in parallel with documentation of the transaction without disruption to your business. We have retained the services of Lazard as our financial advisor, and Cravath, Swaine & Moore as our legal counsel, to assist us in consummating this transaction, and PPC has obtained all relevant internal approvals for the delivery of this proposal, including from our Board and our majority shareholder, JBS.
This preliminary proposal is a non-binding indication of interest, which remains subject to the negotiation, execution and delivery of mutually satisfactory definitive agreements, completion of confirmatory due diligence, approval of the transaction by your Board of Directors, receipt of customary approvals and the termination of Hillshire’s merger agreement with Pinnacle. Nothing contained in this letter or any resulting communications shall create any legally binding agreements or obligations of any party referred to herein until definitive documentation setting forth such legally binding terms has been negotiated, executed and delivered by the parties.
It is our strong preference to reach a negotiated transaction. Working together, we anticipate being in a position to prepare and execute a definitive agreement within two weeks. In the meantime, we remain at your disposal to address any questions you may have.
Yours sincerely,
/s/
William W. Lovette
President and Chief Executive Officer
Pilgrim’s Pride Corporation
/s/
Wesley M. Batista
President and Chief Executive Officer
JBS S.A., Majority Shareholder in
Pilgrim’s Pride Corporation
Conference Call Information
Pilgrim’s and JBS officials will be discussing the proposed transaction with analysts and investors on a conference call at 8:30 a.m. ET today. For those who would like to join the call, access is available by dialing +1 (800) 860-2442 within the U.S. or +1 (412) 858-4600 internationally and requesting the “Pilgrim’s Pride Conference.” Please note that to submit a question to management during the call, you must be logged in via telephone.
Replays of the conference call will be available on Pilgrim’s website approximately two hours after the call concludes and can be accessed through the “Investor” section of www.pilgrims.com. You can also call US +1 (877) 344-7529 within the U.S or +1 (412) 317-0088 internationally requesting conference number 10177422. The webcast will be available for replay through June 10, 2014.
About Pilgrim’s Pride
Pilgrim’s Pride Corporation employs approximately 35,700 people and operates chicken processing plants and prepared-foods facilities in 12 states, Puerto Rico and Mexico. Pilgrim’s primary distribution is through retailers and foodservice distributors.
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Forward-Looking Statements
Statements contained in this press release that state the intentions, plans, hopes, beliefs, anticipations, expectations or predictions of the future of Pilgrim’s Pride Corporation and its management are considered forward-looking statements. These forward-looking statements include statements of anticipated changes in the business environment in which Pilgrim’s operates and in Pilgrim’s future operating results relating to Pilgrim’s offer and the potential benefits of a transaction with Hillshire. There is no assurance that the potential transaction will be consummated, and it is important to note that actual results could differ materially from those projected in such forward-looking statements. Forward-looking statements in this press release should be evaluated together with other factors that could cause actual results to differ materially from those projected in such forward-looking statements, particularly those risks described under “Risk Factors” in Pilgrim’s Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission. Pilgrim’s Pride Corporation undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
CONTACT:
Rosemary Raysor
Pilgrim’s Pride Corp Investor Relations
Rosemary.Raysor@pilgrims.com
(970) 506-8192
www.pilgrims.com
Andy Brimmer / Dan Katcher / James Golden / Alyssa Cass
Joele Frank, Wilkinson Brimmer Katcher
(212) 355-4449
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Exhibit 99.2
Pilgrim’s Pride Corporation (NASDAQ: PPC) Proposal to Acquire Hillshire Brands May 27, 2014
Forward Looking Statements Statements contained in this presentation that state the intentions, plans, hopes, beliefs, anticipations, expectations or predictions of the future of Pilgrim’s Pride Corporation and its management are considered forward-looking statements. These forward-looking statements include statements of anticipated changes in the business environment in which Pilgrim’s operates and in Pilgrim’s future operating results relating to Pilgrim’s offer and the potential benefits of a transaction with Hillshire. There is no assurance that the potential transaction will be consummated, and it is important to note that actual results could differ materially from those projected in such forward-looking statements. Forward-looking statements in this presentation should be evaluated together with other factors that could cause actual results to differ materially from those projected in such forward-looking statements, particularly those risks described under “Risk Factors” in Pilgrim’s Annual Report on Form 10-K and subsequent filings with the Securities and Exchange Commission. Pilgrim’s Pride Corporation undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
Today’s Agenda Transaction Overview Pilgrim’s-Hillshire Key Financial Metrics JBS Perspective
Compelling Value for Hillshire and PPC Shareholders Creation of a branded, protein-focused company with strong, consistent earnings and complementary competencies: US$12B+ in combined revenues and $1.4B in LTM EBITDA PPC strong operational efficiency systems and process Hillshire iconic brands, innovation and marketing capabilities Shared culture of partnering with customers in complementary channels: PPC strong in foodservice and supermarket deli and Hillshire strong in retail Strong cost synergy opportunities and top line expansion into higher margin branded products in North America and internationally Broad supply base of raw materials and growth platform through affiliation with JBS Manageable leverage and commitment to optimal capital structure
Proposal Summary Transaction Terms $45.00 per Hillshire Brands share All cash Valuation and Financing $6.4 billion(1) transaction value, including Hillshire’s net debt as of 3/29/14 25% premium to Hillshire’s 10 day VWAP following the announcement of Pinnacle transaction Implied LTM EBITDA multiple of 12.5x(1), excluding potential synergies Approximately 4x leverage at closing Value Creation Enhances growth and operating margins Strong cost synergies Immediately accretive to Pilgrim’s Pride EPS Timing and Approvals Expected to close in Q3 2014, subject to customary closing conditions and the termination of Hillshire’s merger agreement with Pinnacle Full support of JBS SA, majority shareholder of Pilgrim’s Pride Maintain Chicago as a major center of North American operations (1) Includes $163m fee in connection with termination of Pinnacle transaction.
Today’s Agenda Transaction Overview Pilgrim’s-Hillshire Key Financial Metrics JBS Perspective
PPC- Global, Vertically Integrated Poultry Producer Sales 79% in U.S., 11% in Mexico, 10% to export 3,900 growers, 36 hatcheries, 28 feed mills 35,700 employees; based in Greeley, Colorado LTM SALES .392 EBITDA/% MARGIN 93/10.6% BRANDS US Sales by Channel Retail 50% Foodservice 50% CUSTOMERS Foodservice Retail BRANDS CUSTOMERS PRODUCTS Fresh Chicken Prepared Chicken Value-added export and other chicken products
Hillshire Brands Snapshot HILLSHIRE BRANDS Substantially all sales in U.S. (99%), Headquartered in Chicago, Illinois 89% branded sales/11% unbranded in FY 2013 13 food processing facilities (10 meat and 3 bakery) and 5 distribution centers in U.S. ~9,100 employees; LTM Sales $4bn /Oper. Income $0.4bn (10.1%) Sales by Channel Foodservice & Other 26% Retail 74% RETAIL SUMMARY FINANCIALS LTM SALES 2.93 OPER. INCOME/% MARGIN(1) 324/ 11.1% FOODSERVICE SUMMARY FINANCIALS LTM SALES 1.05 OPER. INCOME/% MARGIN(1) 80/ 7.6% KEY BRANDS = #1 market share in respective category KEY BRANDS Meat Bakery Note: Hillshire Brands fiscal years shown ending June 29, 2013 and June 30, 2012. (1) Segment operating income before allocation of corporate overhead, as reported.
PPC-Hillshire Combined PILGRIM’S PRIDE HILLSHIRE BRANDS COMBINED LTM SALES $8.4 $4.0 $12.4 LTM EBITDA $0.9 $0.5 $1.4 (1) % MARGIN 10.6% 11.6% 11.0% SALES BREAKDOWN PORTFOLIO OF BRANDS Meat 67% Meat-Centric 20% Bakery & Other 13% Meat 89% Meat- Centric 6% Bakery & Other 4% (1) Not including synergies. Fresh Poultry 80% Prepared Products 20%
Top Consumer Packaged Meats Companies LTM Revenue LTM Operating Income $3.3 $4.0 $8.4 $9.0 $8.4 $12.4 LTM Operating Margin (1) $0.3 $0.4 $0.8 $0.9 $0.8 $1.1 (1) 9.4% 9.6% 9.1% 9.8% 9.0% Source: Company filings, FactSet as of May 23, 2014. (1) Represents Kraft Foods’ Refrigerated Meals segment, also including results of Claussen pickles and Boca soy-based meat alternatives. Operating income before corporate expense allocation. Sales growth from ’13A – ’14E.
PPC-Hillshire Portfolio PRODUCT PORTFOLIO REDUCED VOLATILITY THROUGH DIVERSIFICATION CHANNELS WELL-BALANCED BETWEEN RETAIL AND FOODSERVICE Branded 73% Non-branded 27% Foodservice and Other 51% Retail 49%
Synergy Opportunities SG&A PROVEN HISTORY OF EFFICIENT INTEGRATION Shared Services optimization Consolidation of Distribution/ Brokers Leverage marketing and sales infrastructure OPERATIONAL EXCELLENCE UNIQUE RESULT-ORIENTED CULTURE Labor Management Zero Based Budgeting Cold Storage/ Freight Consolidation SOURCING VALUE-CHAIN EFFICIENCY Integration of value chain in fast-growing chicken categories Economies of Scale on Packaging and Ingredients Enhanced raw material sourcing capabilities through JBS network
Proven History of Efficient Integration PPC SG&A Evolution ($mm and % of Sales) De-layering: Closer to customers Shared Service Center consolidation Zero-Base Budget PPC Operational Improvements ($mm) $642MM Operational Improvements 2011-2013 in PPC Result oriented culture with commitment at every level of the organization
Top Line Growth – Brand Extensions Brand Category Hillshire Share Position Relative Market Share Breakfast Sausage #1 2.8X Frozen Protein Breakfast #1 8.6X Smoked Sausage #1 2.8X Lunchmeat #3 0.3X Hot Dogs #1 1.1X Corn Dogs #1 1.3X Super Premium Sausage #1 1.8X Extend Hillshire brands into more categories Create sales opportunities using PPC and Hillshire’s relationships Pursue joint opportunities in school lunch and institutional Expand natural and antibiotic-free products Expand brands in Mexico and internationally
Today’s Agenda Transaction Overview Pilgrim’s-Hillshire Key Financial Metrics JBS Perspective
Indicative Purchase Price Build ($ in millions, except per share data) Offer Price $45.00 % Premium to 10 day VWAP following May 12th Announcement 25% Fully Diluted Shares Outstanding 126.0 Implied Equity Value $5,671 Gross Financial Debt $942 Cash (389) Net Debt $553 Termination Fee $163 Enterprise Value $6,387 Implied LTM EBITDA Multiple 12.5x
Rapid De-Leveraging Through Strong Cash Flow Generation Expected Leverage at close Expected Leverage at 12/ 2015 3.5X 4.2X Evolution of Leverage (Net Debt/ EBITDA) Medium term goal under 2.5X leverage
Today’s Agenda Transaction Overview Pilgrim’s-Hillshire Key Financial Metrics JBS Perspective
Proposed Transaction Aligned with JBS Global Strategy Rationale Branding Associating quality and branding to increase client loyalty Value added products Customized and further processed products for the end users Sales and distribution platform Expanding a global distribution platform to reach end clients Production platform Develop an efficient and diversified global production platform Financial Structure Experienced Management Cost Reduction, Process Optimization Risk Management JBS’s Value & Strategy EBITDA margin
Proposed Acquisition Accretive to JBS Shareholders Creates a platform for strong growth in branded value added products with higher margins in the largest consumer market in the world Accelerates JBS value added sales opportunities in existing businesses through Hillshire’s culture of brand building and innovation Generates more consistent earnings through further diversification Promotes collaboration in R&D between US and Brazil leading to launching of more innovative products Drives strong cost saving opportunities across the enterprise
Rapid De-Leveraging Through Strong Cash Flow Generation Evolution of Leverage (Net Debt/ EBITDA) Expected Leverage at close 4.10X Expected Leverage at 12/ 2015 3.25X Medium term goal under 2.5X leverage
Compelling Value for Hillshire and PPC Shareholders Creation of a branded, protein-focused company with strong, consistent earnings and complementary competencies: US$12B+ in combined revenues and $1.4B in LTM EBITDA PPC strong operational efficiency systems and process Hillshire iconic brands, innovation and marketing capabilities Shared culture of partnering with customers in complementary channels: PPC strong in foodservice and supermarket deli and Hillshire strong in retail Strong cost synergy opportunities and top line expansion into higher margin branded products in North America and internationally Broad supply base of raw materials and growth platform through affiliation with JBS Manageable leverage and commitment to optimal capital structure