UPDATE: Feb. 17, 2022: JBS formally withdrew its proposal to purchase all the shares of Pilgrim's Pride that it does not already own. The Brazilian meat giant said in a statement that it was unable to come to an agreement with the special committee of the Pilgrim's Pride Board of Directors about the terms of the potential transaction.
In an update on the potential transaction from Pilgrim's Pride earlier this month, the chicken producer said that it would not support the buyout unless JBS increased its purchase price. On Nov. 15, JBS increased its offer price to $28.50 a share — $2 higher than the initial offer, but less than the $29.13 average price of the company's stock that day. Pilgrim's Pride rejected the second offer, saying that it didn't appropriately value the company's shares.
After news that the deal was off, Pilgrim's Pride's stock price fell more than 16% in after-hours trading.
- Brazilian meat giant JBS seeks to purchase the shares of U.S. chicken producer Pilgrim's Pride it does not already own, according to a letter sent to the Pilgrim's Pride board of directors.
- JBS, which already owns roughly 80% of the shares in Pilgrim's Pride, proposes buying out the remaining 20% for $26.50 a share — 17% higher than the trading price on Thursday when the letter was sent. The Brazilian company says it only wants to move forward with the purchase if a special committee at Pilgrim's Pride recommends it to shareholders.
- This proposed buyout comes as increasing feed prices and skyrocketing demand are driving up chicken prices in the U.S. Earlier this week, Cargill and Continental Grains proposed buying all the shares of publicly traded Sanderson Farms, creating a new privately held chicken company.
Just four days after Sanderson Farms agreed to a deal that would see the chicken processor be acquired for $4.53 billion, JBS is making a move of its own to bring all of Pilgrim's Pride into the fold.
Brazil's JBS purchased a majority stake in Pilgrim's Pride in 2009 before upping its position to just above 80%. A deal would serve to further deepen JBS' position in the U.S. It reportedly is again looking to list its shares in the U.S. and in June announced it was spending more than $130 million to increase beef production capacity.
Buying the remaining shares JBS doesn't own would not only increase its presence domestically but also likely save it money through less paperwork and regulatory filings. A special committee of independent and disinterested directors are encouraged to assess the acquisition offer, JBS said in the letter.
Protein is a hot space as the insatiable demand by consumers shows no sign of abating. In that regard, few sectors are as popular as poultry. U.S. Department of Agriculture data cited by the National Chicken Council estimated per capita chicken consumption this year of 97.8 pounds, a record amount. In 2000, the figure was 77.4 pounds.
But even as demand soars, the poultry industry is facing challenges. Producers are dealing with a surge in costs through higher feed expenses and a shortage of workers to help them process and pack. Pilgrim's Pride also has been embroiled in an industry-wide price-fixing scandal that has pointed the blame on both current and prior employees at the company.
In early trading on Friday, Pilgrim's Pride stock traded above the $26.50-per-share offer from JBS, a sign shareholders think they can get the meat and poultry giant to sweeten its deal. With poultry demand being high and potential synergies from the transaction, it might make sense for JBS to increase its payout to Pilgrim's Pride shareholders.
It's highly unlikely another meat company would swoop in to buy the remaining 20% stake given JBS' control of the remaining 80%. JBS indicated in its letter to Pilgrim's Pride that it is only interested in acquiring the remaining shares it doesn't own and would not support disposing or selling the shares it already has, or a change of control in the company.