Tyson Offers $1 Billion for Holly Farms

Tyson Foods Inc., the nation’s largest poultry processor, announced a $1-billion buyout offer for Holly Farms Corp. on Tuesday, hours after Holly Farms announced it had received unsolicited buyout proposals and had activated a takeover defense.

Tyson offered $45 cash and a share of its Class A common stock for each of Holly Farms 18.1 million outstanding shares.

Based on Tyson’s closing stock price, the deal would have an indicated value of about $1 billion.

Tyson announced the merger proposal after the close of stock trading. Holly Farms stock closed at $43 a share, up $2.37 1/2 in New York Stock Exchange trading. Tyson rose 62.5 cents a share to $17.62 1/2 in national over-the-counter trading.

No Replies to Calls

A woman who answered the telephone at Holly Farms headquarters in Memphis, Tenn., said all representatives would be in meetings all night and would return phone calls on Wednesday.

Telephone calls to Tyson headquarters in Springdale went unanswered.

Earlier in the day, Holly Farms announced that it had been approached by an unidentified company regarding a possible business combination. Holly Farms said no specific proposal had been received and Holly Farms did not intend to seek one.

“The board of directors of Holly Farms believes the best long-term interests of the company and its shareholders will be served by the company continuing to operate as an independent entity,” stated R. Lee Taylor, president and chief executive.

The company also said it had activated a shareholder rights plan, commonly known as a “poison pill” takeover defense aimed at making a hostile takeover prohibitively expensive.

In a letter from Tyson Chairman and Chief Executive Don Tyson to Taylor, Tyson referred to a meeting four weeks ago in Memphis, Tenn., and said he believed it was an ideal time for the companies to merge.

Tyson said the offer would expire by close of business Oct. 19 and asked for access to nonpublic corporate information to determine whether his company might increase its offer.

Tyson is a wholly integrated poultry company, according to Robert Justice, Tyson’s executive vice president for community relations. He said the company produces 14 million pounds of chicken meat a week.

Justice said Tyson has hatcheries, grows its own chickens, operates its own feed mills, has its own processing plants and markets both whole chickens and “value enhanced products” to supermarkets, fast food chains, and institutional customers.

Emphasis on Chicken

According to the company’s 1987 annual report, Tyson had gross sales last year of $1.785 billion, with net income of $67 million. Tyson has 25,600 employees, Justice said.

Holly Farms is a diversified foods company, with about 50% of its sales concentrated in chicken. The company also provides other meats for the food service industry and mills flour.

Holly Farms apparently made its announcement before receiving the Tyson proposal, stating that it had not received any written proposals.

After the company’s announcement, Holly Farms spokesman Ted Bailey in Memphis declined to comment about how many businesses had expressed interest in a merger or which companies were involved.

“We remain committed to our shareholders, a leader in long-term investment performance for shareholders, a leader in long-term dividend growth and a leader in financial strength and cash flow,” Taylor said. “We believe we have established a superior record in all these respects, even in poor years. We have every reason to believe that our future record will be even better.”

Holly Farms had sales of $1.6 billion last year and net income of $36.2 million, or $2.06 a share. In the first quarter of this year, Holly Farms reported sales of $504.2 million and net income of $29.8 million, or $1.65 per share.