CHICAGO - Poultry giant Tyson Foods Inc., agreed to buy smaller rival Hudson Foods Inc., which was recently embroiled in a health scare over tainted hamburger, for an estimated $643 million, the companies said Thursday.
Hudson's stock climbed $3.1875 to $20.375 on the New York Stock Exchange, while Tyson fell 25 cents to $21.125 on Nasdaq in late morning trading Thursday.
The definitive agreement calls for Tyson to pay $8.40 in cash plus 0.6 Tyson share, or $21.225 per share for each of Hudson's 30.3 million shares outstanding, based on Tyson's closing price Wednesday on Nasdaq.
"The decision to sell was not an easy one, or one that was made precipitously," Hudson Chairman James Hudson said in a news release.
The sale comes just one week after Hudson Foods agreed to sell its beef processing plant at Columbus, Neb., to meat processor IBP Inc. The plant was associated with the recall last month of 25 million pounds of beef that was suspected of being tainted by E. coli bacteria.
According to industry figures, Tyson is the largest broiler processor, with about 21.7 percent market share, while Hudson ranks as the fifth-largest, with about 5.3 percent market share.
"My immediate reaction is it's a very positive move for both sides," said Piper Jaffray analyst George Dahlman.
He said Tyson and Hudson have been competing in many arenas, including as suppliers for Wal-Mart Stores Inc.'s Sam's Club warehouse outlet and restaurant chains McDonald's Corp. and Boston Market.
"This will allow their customers to be serviced well," Dahlman added.
The deal is subject to regulatory approvals and the approval of Hudson shareholders.
Other terms of the deal were not immediately available, including whether Hudson officials will be involved in the Tyson operations after the transaction.
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