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Poultry giant Sanderson Farms Inc (Nasdaq: Chart SAFM - $0. 5.25 (2.509%) ) has agreed to be sold for $4.53 billion to food company Cargill Inc and agricultural investment firm Continental Grain Co in a deal that would take the country’s third-biggest chicken producer private.
On Monday, the two buyers announced they have formed a joint venture to acquire Sanderson Farms, which will be combined with Wayne Farms, a Continental Grain subsidiary, to create a new, privately-held poultry business.
Under the terms of the deal, Cargill and Continental Grain will pay $203 per share in cash for each share of Sanderson Farms, a 30% premium above the stock price on June 18, before The Wall Street Journal’s report regarding a potential sale.
After the transaction’s expected close in late 2021 or early 2022, Wayne Farms’ chief executive officer Clint Rivers will lead the combined company.
The new entity would represent about 15% of chicken production in the US. The industry leader, Tyson Foods Inc, holds one-fifth of the market, while Pilgrim’s Pride Corp produces about 16% of the national total, The Wall Street Journal noted.
Mississippi-based, family-run Sanderson Farms has 12 plants across the southeast US, which employ 17,000 workers and 1,000 growers. Last year, it processed more than 4.8 billion pounds of product.
The company supplies supermarket chains including Walmart Inc and Albertsons Cos, as well as restaurant distributors like Sysco Corp and US Food Holding Corp.
Wayne Farms, which is headquartered in Georgia, has more than 9,000 workers and makes products under several brand names, including Wayne Farms, Platinum Harvest, Chef’s Craft, Naked Truth and Ladybird.
Paul Fribourg, Continental Grain’s chief executive officer, said in a statement, "Wayne Farms has been one of the most important and successful parts of Continental Grain for almost 60 years, so bringing together two great partners with two great poultry companies will ensure good things for our customers, our grower partners and our employees."
Joe Sanderson, Sanderson Farms’ chief executive officer, said the company is “proud to be joining with Cargill and Continental Grain” and “confident that they will be strong stewards of the Sanderson Farms team, brand and assets going forward.”
Monday’s announcement comes as poultry prices in the US continue to rise due to increased demand for chicken breasts, wings and other products from both consumers as well as restaurant chains and supermarkets.
Meat processors are also facing production challenges to meet the demand due to several factors, including labor shortages, freight cost and supply issues.
In a statement, David MacLennan, chief executive officer of Cargill, said, "Expanding our poultry offerings to the U.S. is a key enabler of our ability to meet customer and consumer demands. With these great businesses, and our strong partnership, we believe we will deliver a superior portfolio of products and services to our customers."
Source: Equities News