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Tyson Foods to Buy Holly Farms

June 23, 1989

MEMPHIS, Tenn. (AP) _ Holly Farms Corp.‘s directors on Friday accepted rival Tyson Foods Inc.’s $1.4 billion buyout offer and agreed to pay ConAgra Inc. to drop out of the bidding.

Under terms of the agreement, ConAgra will receive $50 million to end a previous merger pact with Holly Farms. The Memphis-based poultry processor will pay a $20 million termination fee; ConAgra will receive the remaining $30 million when Tyson completes its purchase of Holly Farms stock.

″It’s a done deal,″ said Jim Blair, chief legal counsel Springdale, Ark.- based Tyson, of the $70-a-share cash offer.

The settlement boosted ConAgra stock $2.25 a share to $36.25 in New York Stock Exchange trading. Holly Farms finished at $69.25, up 25 cents a share on the Big Board. Tyson was unchanged at $18.25 in over-the-counter trading.

Tyson, the nation’s largest poultry processor, began what erupted into a bidding war over Holly Farms in October, when it offered to acquire the company for $49 a share in cash and securities.

In resisting Tyson’s advances, Holly Farms announced two attempts to merge with ConAgra of Omaha, Neb.

The latest Holly Farms-ConAgra agreement, which was expected to go before shareholders next month, was based on a stock swap valued at $1.3 billion, or $68 a share.

″Tyson played the game to win. They put out a number that left Holly’s board with no other choice but to accept,″ said John McMillin, an analyst with Prudential-Bache Securities Inc. in New York. ″It was a marriage not of choice by Holly’s board but of necessity.″

Tyson, Holly Farms and ConAgra also agreed to terminate all litigation among the companies. Tyson had filed suit in Delaware - where Holly Farms is incorporated - accusing the company of wrongly favoring ConAgra at Tyson’s expense. Tyson has asked for $500 million in damages.

The Holly Farms board also disolved its shareholders’ rights plan or ″poison pill″ aimed at fending off hostile bidders by making an unwanted takeover prohibitively expensive.

A Delaware Chancery Court approved the agreement among the three companies shortly before the Holly Farms board accepted Tyson’s bid.

″We are pleased that the situation has finally been resolved and believe that we have an agreement that we can strongly recommend to our stockholders,″ Holly Farms President R. Lee Taylor said in a statement.

Holly Farms has 18.1 million outstanding common shares, but the $70-a-share purchase will total $1.4 billion on a fully diluted basis when shares held as bonds are converted, Blair said.

″It will ultimately be a merger but it continues as a tender offer,″ he said. ″We will close our tender offer off and then if we need a shareholder vote, we will be a majority of the shares.″

Tyson Foods processes more than 16.5 million chickens a week, and Holly Farms is a diversified company heavily involved in the sale of fresh fryers. ConAgra is a diversified company specializing in food and agricultural services.

Charles M. Harper, ConAgra’s chief executive officer, said his company was unwilling to meet Tyson’s latest bid.

″A higher bid would have taken us past the point where we were confident a merger would meet ConAgra’s demanding financial standards,″ Harper said in a statement.

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