Agribusiness August 13, 2021 5:36:20 pm

Pilgrim’s Pride market cap moves to $6.7 billion on takeover talk

By Paul Hughes

GREELEY — Pilgrim’s Pride Corp. (Nasdaq: PPC) shares rose 21% in midday trading, hitting a new 52-week high, on a bid by its Brazil-based majority owner to take the chicken and pork processor private.

Brasilia-based JBS SA offered to buy the 20% of PPC it doesn’t own for $26.50 a share. Any deal needs approval “of a majority of the aggregate voting power” of that 20%, the press release from JBS said.

The per-share bid represents a 22% premium on Pilgrim Pride’s trailing 30-calendar-day average, it said.

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Shares opened above JBS’ bid and stayed north of $27 Friday; a year ago, shares were $17 apiece.

JBS is the world’s largest meatpacker. It bought 64% of Pilgrim’s Pride in 2009, about a year after the latter had filed for bankruptcy, with $2 billion in debt.

The Brazilian behemoth took on the debt and added $800 million in cash — paying creditors in full and giving then-shareholders a 36% stake in the new company, the Wall Street Journal reported at the time.

Two years earlier, JBS had purchased Swift Foods Co., owned by Dallas-based private equity firm HM Capital Partners LLC, which had bought it from ConAgra Foods Inc. in 2002. JBS paid $1.4 billion — 85% of the price being assumption of debt — for the pork processor.

JBS focuses on beef. Owning 80% of Pilgrim’s Pride, with its pork and chicken “enabled JBS to expand its portfolio in the United States beyond beef and broaden its retail distribution network,” the Brazil firm said in its release.

Barclays is financial advisor and Cravath, Swaine & Moore LLP is legal advisor to JBS on its bid.

Pilgrim’s Pride processes 16% of chicken meat in the U.S., Reuters said, and JBS USA Holdings Inc. is the second-largest U.S. meat processor, according to Statista, with $35 billion in 2020 sales, trailing the No. 1 company, Springdale, Arkansas-based Tyson Foods Inc., at about $42 billion.

Pilgrim’s Pride at the end of July reported second quarter results, including net sales of $3.64 billion, up 29% year-over-year, and adjusted EBITDA of about $372 million, 231% higher.

Net sales rose in its major markets in North America and Europe. Adjusted earnings per share of 63 cents surpassed consensus estimates and were up from the one-cent loss in the second quarter of 2020.

“Demand in the U.S. continues to recover” from pandemic declines and domestic demand and results had hit levels higher than before COVID restrictions kicked in, PPC said in its earnings press release.

It had borrowed at least $350 million to help navigate last year’s upheaval.

This summer, JBS was hit by a cyberattack that temporarily halted operations at its Greeley plant.

In June, Pilgrim’s Pride bought the U.K. and Ireland grab-and-go prepared-meats and meals business of Tralee, Ireland-based Kerry Consumer Foods for $1 billion.

Pilgrim’s Pride executives were indicted last year for alleged price-fixing; Bob Evans Farms, which sells meat products and is a unit of St. Louis-based cereal maker Post Holdings Inc. (NYSE: POST), said PPC had been inflating poultry prices for 10 years.

Pilgrim’s Pride Corp. pleaded guilty in February and paid a $108 million fine.

The four executives, including two former CEOs of the company, asked at about the same time for a delay in their trial, and in May, a judge granted the request, moving the trial from Aug. 2 to Oct. 25.