Tyson advances on its Hillshire deal

SPRINGDALE, Ark. - Tyson Foods (TSN) has signed a definitive deal to purchase Hillshire Brands (HSH) for $7.75 billion, two days after the maker of Jimmy Dean sausages and Ball Park hot dogs was let out of its agreement to buy Pinnacle Foods (PF).

Chicago-based Hillshire agreed to buy Pinnacle for $4.23 billion in May. But then Tyson and Pilgrim's Pride (PPC) got into a bidding war for Hillshire, with Hillshire accepting Tyson's $63 per share offer last month. The deal with Tyson, which the companies value at about $8.55 billion, including debt, was contingent on Hillshire walking away from its deal with Pinnacle, which makes Birds Eye frozen vegetables and Wish-Bone salad dressings..

Springdale, Arkansas-based Tyson said Wednesday that it will pay the $163 million termination fee to Pinnacle.

Tyson has said it sees the combination as a way to expand its prepared food business. Products like Jimmy Dean breakfast sandwiches and other convenience foods are more profitable than fresh meat, such as chicken breasts, which leave Tyson with less wiggle room to pad prices.

Selling more types of products also gives it a buffer from volatile price swings of fresh meat. When beef prices rise and shoppers turn to other meats, the company can sell more chicken or bacon, for example.

Tyson expects the acquisition to close by Sept. 27.