Mergers and acquisitions (M&A) peaked in the United States in 2007 with mergers and acquisitions totalling $880.7 billion. M&A activity plummeted between 2008 and 2013, but increased significantly in 2014 with total deals valued in June 2014 at $785.5. Many businesses accumulated large cash holdings between 2007 and 2014, and in June 2014 the stock market hovered again near record highs. Companies at this time seemed less inclined to return cash to shareholders through share buybacks. Deals in 2014 include medical device maker Medtronic's (MDT) $42.9 billion acquisition of rival Coviden (COV), telecom giant Level 3 Communications' (LVLT) $5.7 billion purchase of TW telecom (TWTC), Williams Companies (WMB) $6 billion controlling stake in natural gas driller Access Midstream Partners (ACMP), and SanDisk's (SNDK) $1.1 billion takeover of flash technology company Fusion-io (FIO). Another M&A deal was the acquisition of Hillshire (HSH) by the meat company Tyson (TSN). TSN increased its all-cash bid for Hillshire (HSH) to $8.55 billion, or $63 a share representing a 70% premium on the pre-bid trading price for Hillshire stock. TSN was involved in a bidding war with Pilgrim's Pride (PPC), which helped escalate the price.

Requirement:

5.1 What is the difference, if any, between a merger, an acquisition, a takeover, a hostile takeover? (4 marks)

5.2 Explain why you think TSN management would offer Hillshire shareholders a 70% premium on the pre-bid trading price of the shares. (6 marks)