Big Food’s M&A Craze Comes at a High Price: What Investors Should Know

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Earlier this month, we reported that Tyson Foods, Inc. (NYSE:TSN) was in the running for a takeover of meat processor Hillshire Brands Co. (NYSE:HSH); Tuesday morning, a new report from Forbes revealed that Hillshire will forgo a former offer from Tyson’s rival Pinnacle Foods Inc. (NYSE:PF) in favor of Tyson’s all-cash offer of $8 billion. Furthermore, the general consensus among industry experts is that investors can and should expect the Big Food M&A frenzy to continue, leading to the inevitable question, is it possible for Big Food to get even bigger? And what does this shift toward consolidation mean for investors and consumers alike…not to mention producers, the farmers who grow the meat and produce Big Food processes and packages.

Analysts and investors alike have been pretty enthusiastic regarding the recent industry consolidation deals, and with good reason. But as consumers, and as citizens, investors may want to take a second look at Big Food’s consolidation. The recent takeovers may be profitable in the short term, but they also harm consumers, producers and ultimately, probably investors too, in the long run.

Good or bad, experts seem to agree that the trend toward consolidation is likely to continue throughout the remainder of 2014, though it’s possible that companies may begin to find themselves under scrutiny by U.S. watchdogs, should the threat to consumers and farmers appear severe enough. “The government will be watching to see if there is enough competition in the market to allow these mergers to go through,” said Iowa State University professor of economics Chad Hart, in an interview with USA Today.

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