Holly Finds White Knight in ConAgra

MEMPHIS, Tenn. —  Holly Farms Corp. moved Thursday to sidestep a hostile takeover by rival poultry producer Tyson Foods Inc. by agreeing to be acquired by ConAgra Inc. in a stock swap valued at about $1 billion.

The acquisition is subject to approval by stockholders of Holly Farms and Omaha-based ConAgra, the companies said in a statement.

Financial analysts said the ConAgra agreement does not push Tyson of Springdale, Ark., out of the picture. It has been trying to acquire Holly Farms for a month, and its most recent offer was valued at $941 million.

“I don’t think it’s clear-cut right now,” said Napoleon Overton, an analyst with the Morgan Keegan Co. in Memphis.

A secretary in the office of John Tyson, vice president, said the company had no comment on the Holly Farms announcement. Spokesmen for the company were unavailable.

In trading on the New York Stock Exchange, Holly Farms fell 87.5 cents a share to $51.875 while ConAgra dropped $1.25 to $27.625.

ConAgra, a diversified company with more than 60% of its business in prepared foods, is offering a stock swap, the value of which will be figured in January, while Tyson is offering cash, Overton said.

“That deal could be closed almost immediately,” he said.

John McMillin, an analyst with Predential-Bache Securities in New York, said ConAgra’s offer would amount to $55 a share for Holly Farms’ 18.1 million shares of common stock, based on Thursday’s market prices.

Tyson has made a $52-a-share offer worth $941 million to Holly Farms’ stockholders and has indicated that the bid could be raised to $54 a share, McMillin said.

McMillin said it was clear, however, that Holly Farms management, led by President R. Lee Taylor II, will continue to oppose Tyson.

“I think ConAgra has the upper hand,” he said.

Analysts say Taylor and Tyson Chairman Don Tyson have different business styles, and McMillin said Holly Farms’ management would likely be replaced if Tyson took over.

“Taylor would sell his company to Don Tyson as a last resort,” he said.

Lynn Phares, a spokeswoman for ConAgra, said Taylor and his top assistants are expected to stay on with ConAgra if the acquisition is approved.

“But it’s way to early for us to talk about what will happen after the merger,” she said.

Holly Farms has 50% of its business in processed chicken, and the ConAgra acquisition would push Holly Farms’ share of the branded chicken market to almost 25%, McMillin said.