Ends 6-Month Tug-of-War : Holly Farms OKs $1.38-Billion ConAgra Bid

Holly Farms Corp., seeking to resolve a six-month-long tug-of-war between ConAgra Inc. and Tyson Foods Inc., announced Sunday that it has accepted a sweetened $1.38-billion buyout bid from ConAgra that replaces an earlier deal rejected by Holly Farms shareholders.

Holly Farms said ConAgra would acquire the rival Memphis-based poultry processor in a $74.81-a-share stock swap. The bid, worth a total of $1.38 billion at current stock prices, is significantly higher than the $1.1-billion agreement turned down at a Holly Farms shareholders meeting last month and than Tyson’s $63.50-a-share, or $1.15 billion, offer.

Under the new agreement, each of Holly Farms’ 18.4 million outstanding shares would be exchanged for 2.1 ConAgra shares.

ConAgra stock closed at $35.625 a share in New York Stock Exchange composite trading Friday, meaning Holly Farms shareholders would receive stock worth $74.81 per share.

Holly Farms closed at $62.625 on the NYSE on Friday.

Despite the new agreement, Tyson, which first offered to buy Holly Farms in October, said it wasn’t giving up.

“We’re not through trying to compete for the company,” James Blair, Tyson’s general counsel, said Sunday.

Blair said Tyson would consider its options and see how investors react to the new agreement. He also noted that litigation connected with the takeover battle continues in courts in Delaware, and said Tyson would await the outcome of the lawsuits before deciding what it would do.

Holly Farms management has consistently shunned Tyson’s bids, although they have been higher than previous ConAgra proposals.

After the initial deal with Omaha, Neb.-based ConAgra was rejected April 14, Holly Farms reopened bidding. Tyson has charged the auction process was unfair, and Blair said Sunday that his company was trying to “find a way that we could compete on a level playing field and compete fairly.”

A Delaware Chancery Court judge last week agreed that the bidding procedures were unfair to Springdale, Ark.-based Tyson, but said there were no legal grounds to halt the auction.

Under the previous Holly Farms-ConAgra agreement, Holly Farms agreed to sell ConAgra certain of its assets if the proposed buyout fell through. However, the agreement approved by the Holly Farms board late Saturday night removed that provision.

The newest offer is subject to approval of the Holly Farms shareholders, which were lobbied heavily by Tyson before the last vote.

Holly Farms vice president Ted Bailey said the company hoped to have another shareholder vote by the end of July. Bailey said the new agreement also allows Holly Farms to terminate the deal if it receives a higher offer. Holly Farms agreed to pay ConAgra a fee of $15 million plus actual expenses if the agreement fails.

Tyson has objected to that fee agreement. Blair said Sunday that Holly Farms shareholders were being forced to vote for the agreement, or have millions of dollars taken away from the firm.