This morning, shares of AdvancePierre Foods (APFH 40.23, +3.56) trade about 9.71% higher in reaction to a buyout offer from prepared food manufacturer Tyson Foods (TSN 65.19, -0.20 -0.31%). TSN offered $4.2 billion, or about $40.25 per share in cash, in a deal which is expected to be immediately accretive to TSN’s earnings.
As mentioned, the two parties announced a merger agreement pursuant to which a subsidiary of TSN will launch a tender offer to acquire all of APFH’s outstanding common shares for $40.25 per share in cash.
The total enterprise value of the transaction, which has been approved by the Boards of Directors of both companies, is about $4.2 billion, including $3.2 billion in equity value and $1.1 billion in assumption of APFH debt. The offer price represents a 31.8% premium to APFH’s closing price on April 5, 2017, the most recent unaffected trading day, and a 41.6% premium to the company’s 60-day volume-weighted average trading price ending on April 5, 2017.
Additionally, funds affiliated with Oaktree Capital Management, L.P., which own about 42% of the outstanding shares of APFH common stock, have entered into a tender and support agreement pursuant to which those funds have agreed to tender their APFH shares pursuant to the tender offer.
TSN expects the deal to be immediately accretive to EPS on both a GAAP and cash basis, excluding one-time costs. Further, TSN expects the transaction will result in cost synergies of about $200 million, to be fully realized within three years. Cost synergies will be created by a consolidated manufacturing footprint, procurement efficiencies, distribution network consolidation, and addressing redundant sales and marketing functions and duplicative corporate overhead. The transaction is expected to generate revenue synergies over time by utilizing TSN’s product innovation platform and portfolio of brands to drive growth across APFH’s leading sandwich, entrée, and snack categories.
Ahead of this announcement, last night in a press release TSN announced the exploring of the sale of three non-protein businesses. In February, TSN announced its strategy to sustainably feed the world with the fastest growing portfolio of protein packed brands. As the company focuses on its growth and value creation, it is exploring the sale of its Sara Lee Frozen Bakery business, the Kettle business and Van’s.
Shares of TSN appear to be retreating at the moment after enjoying modest gains early in the session. Still, the stock holds up slight gains both YTD, +4.4%, and in April +5.2%.