ACQUISITIONS AND DISPOSITIONS

Acquisitions

On August 28, 2014, we acquired all of the outstanding stock of The Hillshire Brands Company ("Hillshire Brands") as part of our strategic expansion initiative. The purchase price was equal to $63.00 per share for Hillshire Brands' outstanding common stock, or $8,081 million. In addition, we paid $163 million in cash for breakage costs incurred by Hillshire Brands related to a previously announced acquisition. We funded the acquisition with existing cash on hand, net proceeds from the issuance of new senior notes, Class A common stock (Class A stock), and tangible equity units as well as borrowings under a new term loan facility (refer to Note 7: Debt and Note 8: Equity). Hillshire Brands' results from operations subsequent to the acquisition closing are included in the Prepared Foods segment.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the acquisition date. Certain estimated values for the acquisition, including goodwill, intangible assets, plant property and equipment, and deferred taxes, are not yet finalized and the preliminary purchase price allocations are subject to change as we complete our analysis of the fair value at the date of acquisition.



	in millions
Cash and cash equivalents		$	72
Accounts receivable		236
Inventories		421
Other current assets		344
Property, Plant and Equipment		1,306
Goodwill		4,804
Intangible Assets		5,141
Other Assets		45
Accounts payable		(347		)
Other current liabilities		(324		)
Long-Term Debt		(868		)
Deferred Income Taxes		(2,069		)
Other Liabilities		(517		)
Net asset acquired		$	8,244

The fair value of identifiable intangible assets is as follows:



			in millions
Intangible Asset Category	Type	Life in Years	Fair Value
Brands & trademarks	Non-amortizable	Indefinite	$	4,062
Brands & trademarks	Amortizable	20 years	532
Customer relationships	Amortizable	Weighted average life of 16 years	541
Non-compete agreements	Amortizable	1 year	6
Total identifiable intangible assets			$	5,141

As a result of the acquisition, we recognized a total of $4,804 million of goodwill. The purchase price was assigned to assets acquired and liabilities assumed based on their estimated fair values as of the date of acquisition, and any excess was allocated to goodwill, as shown in the table above. Goodwill represents the value we expect to achieve through the implementation of operational synergies and growth opportunities primarily in our Prepared Foods segment. We do not expect the final fair value of goodwill to be deductible for U.S. income tax purposes.

We used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis, relief-from-royalty and excess earnings valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Under these valuation approaches, we are required to make estimates and assumptions about sales, operating margins, growth rates, royalty rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

The acquisition of Hillshire Brands was accounted for using the acquisition method of accounting, and consequently, the results of operations for Hillshire Brands are reported in our consolidated financial statements from the date of acquisition. Hillshire Brands' one month results were insignificant to our Consolidated Statements of Income.

The following unaudited pro forma information presents the combined results of operations as if the acquisition of Hillshire Brands had occurred at the beginning of fiscal 2013. Hillshire Brands' pre-acquisition results have been added to our historical results. The pro forma results contained in the table below include adjustments for amortization of acquired intangibles, depreciation expense, interest expense related to the financing and related income taxes. Any potential cost savings or other operational efficiencies that could result from the acquisition are not included in these pro forma results.

The 2013 pro forma results include transaction related expenses incurred by Hillshire Brands prior to the acquisition of $168 million, including items such as consultant fees, accelerated stock compensation and other deal costs; transaction related expenses incurred by the Company of $115 million, including fees paid to third parties, financing costs and other deal costs; and $32 million expense related to the fair value inventory adjustment at the date of acquisition.

These pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the results of operations as they would have been had the acquisitions occurred on the assumed dates, nor is it necessarily an indication of future operating results.



	in millions (unaudited)
	2014		2013
Pro forma sales	$	41,311	$	38,195
Pro forma net income from continuing operations attributable to Tyson	1,047		655
Pro forma net income per diluted share from continuing operations attributable to Tyson	$	2.50	$	1.52

During the second quarter of fiscal 2014 we acquired a value-added food business as part of our strategic expansion initiative, which is included in our Prepared Foods segment. The aggregate purchase price of the acquisition was $56 million, which included $12 million for Property, Plant and Equipment, $27 million allocated to Intangible Assets and $18 million allocated to Goodwill.

During fiscal 2013, we acquired two value-added food businesses as part of our strategic expansion initiative, which are included in our Prepared Foods segment. The aggregate purchase price of the acquisitions was $106 million, which included $50 million for Property, Plant and Equipment, $41 million allocated to Intangible Assets and $12 million allocated to Goodwill.

Dispositions

On July 28, 2014, we announced our plan to sell our Brazil and Mexico operations, which are included in our International segment, to JBS SA ("JBS") for $575 million in cash. As a result, we conducted an impairment test and recorded a $39 million impairment charge in the fourth quarter of fiscal 2014 related to our Brazil operation. We expect to complete the sale of our Brazil operation in the first quarter of fiscal 2015. We expect to realize a gain on the sale of our Mexico operation, which is pending the necessary government approvals, and expect it to close in the first half of fiscal 2015. We have reclassified the assets and liabilities related to Mexico and Brazil to assets and liabilities held for sale in our 2014 Consolidated Balance Sheet.

The following table summarizes the net assets and liabilities held for sale:



	in millions
	2014
Assets held for sale:
Accounts receivable, net	$	74
Inventories	141
Other current assets	72
Net property, plant and equipment	132
Goodwill	16
Other assets	11
Total assets held for sale	$	446
Liabilities held for sale:
Current debt	$	32
Accounts payable	61
Other current liabilities	27
Long-term debt	9
Deferred income taxes	12
Total liabilities held for sale	$	141

In June 2014, we sold our 50 percent ownership interest of Dynamic Fuels LLC (Dynamic Fuels) for $30 million cash consideration at closing and up to $35 million in future cash payments contingent on Dynamic Fuels' production volumes over a period of up to 11.5 years. Additionally as part of the terms of the sale, we were released from our guarantee of the $100 million Gulf Opportunity Zone tax-exempt bonds, which were issued in October 2008 to fund a portion of the plant construction costs. Dynamic Fuels previously qualified as a variable interest entity which we consolidated, as we were the primary beneficiary. As a result of the sale, we deconsolidated Dynamic Fuels and recorded a gain of approximately $3 million, which is reflected in Cost of Sales in our Consolidated Statements of Income. We will recognize the future contingent payments in income as the required volumes are produced. At September 28, 2013, Dynamic Fuels had $166 million of total assets, of which $142 million was net property, plant and equipment, and $113 million of total liabilities, of which $100 million was long-term debt.

In fiscal 2014, we recorded impairment charges of $52 million related to the planned closure of three Prepared Foods plants. The Company’s Cherokee, Iowa plant closed in September 2014, while the Company’s plants in Buffalo, New York and Santa Teresa, New Mexico are expected to cease operations during the first half of calendar 2015. The impairment charges are reflected in the Consolidated Statements of Income in Cost of Sales. Additionally, in April 2014, Hillshire Brands announced that it will discontinue all production at its Florence, Alabama facility by December 30, 2014. The remaining closure costs are not expected to have a significant impact on the Company's financial results.