In your opinion do you think Tyson overpaid, if so why did it do so?
Yes, I do think so. Tyson ultimately ended up shelling out $63 per share for Hillshire, which was 15% above the final offer by Pilgrim’s Pride, 26% higher than its initial bid, and 70% above where Hillshire’s stock was trading prior to the commencement of any bidding . Tyson believes by adding Hillshire to its portfolio would create a larger market share in the breakfast category the fastest growing segment in food.Growing by acquisition is nothing new to the company. In 2001, Tyson acquired IBP Inc., which at the time was the largest beef packer and number two pork processor in the U.S., for $3.2 billion in stock and cash and over the next several years, Tyson has made numerous acquisitions in the food industry including Hudson Foods Company, Washington Creamery, and Prospect Farms, Wilson Foods, Honey bear Foods as well as several others .Hillshire is a strategic fit for Tyson Foods, the largest acquisition in Tyson’s history ,but it will take some time for them to digest it all plus will assume more debt to finance the high priced deal.
Should buying firms avoid auctions while trying to buy other firm
They should because when a company enters a bidding auction for a potential acquisition, it stands the risk of overpaying. The more heated the auction, the greater the risk. On top of this, auctions are time pressured, and everybody is bidding on something they all value highly. In auction we tend to overvalue things that we think might run out. Auction items are limited in that they are unique, meaning that only one firm can have it, and limited in time. Once we are involved in an auction we are not just paying to own the sale item, we are paying to beat other people who are bidding and prevent them
