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Stock Market & Financial Investment News

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June 6, 2014
12:48 EDTTSN, PPC, HSHTyson Foods drops after analyst warns deal could be short-term negative
Shares of meat producer Tyson Foods (TSN) are falling after BB&T downgraded the stock to Hold from Buy. The company will likely win the bidding war for Hillshire Foods (HSH), but the deal may not be good for Tyson's shareholders in the short-term, BB&T wrote. WHAT'S NEW: The bids for Hillshire have become "somewhat lofty," BB&T analyst Brett Hundley wrote in a note to investors earlier today. As a result, the deal may not be beneficial for Tyson from a financial perspective in the short-term, the analyst warned. After Pilgrim's Pride (PPC) raised its bid for Hillshire to $55 per share, Tyson's could respond with a $60 per share bid, Hundley stated. If Tyson funds a takeover at that price with debt, it would risk ruining its investment grade credit rating, according to Hundley. Alternatively, the company could issue new shares and maintain its investment grade credit rating, according to the analyst. In the latter scenario, Tyson's stock would only be worth about $47 per share, creating an unattractive risk/reward ratio, Hundley contended. Meanwhile, the chicken market is probably peaking and the profit margins on red meat are challenged, the analyst added. PRICE ACTION: In early afternoon trading, Tyson fell 2% to $40, while Hillshire was flat near $58.58.
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