(The following statement was released by the rating agency)NEW YORK, June 05 (Fitch) The current bidding war to gain control of The Hillshire Brands Co. (Hillshire: 'BB/Rating Watch Evolving') highlights the necessity for meat protein companies to attain growth through acquisition of branded meats, according to Fitch Ratings. A desire to move up the value chain to higher margin branded packaged meats and protein-based products, in turn increasing pricing power and minimizing the impact of skyrocketing livestock costs, is fueling the bidding.Pilgrim's Pride Corp.'s parent (Brazilian meat giant JBS S.A. 'BB-/Stable'), on May 27 announced a proposal to acquire Hillshire for $45 per share or $6.4 billion. On May 29, Tyson Foods, Inc. eclipsed that offer with a $50 per share or $6.8 billion proposal, effectively putting the company in play.  Pilgrim Tuesday then trumped Tyson's unsolicited offer with a bid of $55 per share or $7.7 billion. Both offers require the termination of Hillshire's May 12, 2014 definitive agreement to acquire Pinnacle Foods, Inc. (Pinnacle) for $6.6 billion and include the $163 million termination fee payable to Pinnacle. Neither Tyson nor Pilgrim is interested in acquiring Pinnacle due to slow organic growth trends in many of the shelf-stable center of store categories in which it competes. Protein processors have had to deal with skyrocketing prices due to limited animal supply. Hillshire's name brand recognition and significant pricing power carried by its Jimmy Dean, Hillshire Farms, and Ball Park brands are key to the bidding companies' goal of bolstering profit margins. Meat protein companies have clearly been focused on investing and growing in branded packaged meats and value-added meat-based products.  Tyson has been targeting sales growth of 6%-8%, inclusive of bolt-on acquisitions, in value-added products and prepared foods. The company projects that acquiring Hillshire could double its prepared foods revenue and increase segment profitability by over 300 basis points to above 5%.Fitch anticipates a counteroffer from Tyson and believes there is a risk that bidding for the company could get irrational as both companies fight for control. Tyson likely has more flexibility, given its strong investment grade balance sheet and willingness to use equity to fund the buyout, but JBS/Pilgrim's has a proven willingness to take risks when it comes to acquisitions.  Acquisition multiples for commodity oriented companies have historically been in the high single-digit range while those for US- based branded packaged food firms can approach the high teens. Pilgrim's latest bid translates to roughly 14x Hillshire's fiscal 2013 EBITDA, so significantly higher bids could be hard to justify, raising the importance of cost synergies to the suitor's bottom line.  Fitch last week revised the Rating Watch on Hillshire to Evolving from Negative and revised Tyson's Ratings Outlook to Stable from Positive. Tyson's ratings were affirmed at 'BBB/F2'.Contact:Carla Norfleet TaylorDirectorCorporatesFitch Ratings, Inc.70 W. Madison StreetChicago, IL 60602+1 312 368-3195Kellie Geressy-Nilsen Senior Director FitchWire +1 212 908-9123 Fitch Ratings, Inc. 33 Whitehall StreetNew York, NY 10004Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com.Additional information is available on 
  www.fitchratings.com.
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