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Chick-News.com Poultry Industry News, Comments and more by Simon M. Shane

Sanderson Farms Agrees to Buyout

08/10/2021

According to press reports, Sanderson Farms (SAFM) has agreed to be acquired by a consortium comprising Cargill Inc. and Continental Grain for a cash consideration of $4.53 billion or $203 per share, representing a 30 percent premium over the closing price on Friday, August 6th.

 

Sanderson Farms processes approximately 14 million birds per week in 13 plants and facilities.  The deal will allow a merger with Wayne Farms currently ranked 6th in the Nation. Their approximately 8.0 million birds per week will contribute to a total of 22 million birds a week, moving the combined company closer to 2nd ranked Pilgrim's Pride in the U.S.

 

The transaction is expected to close by the end of 2021.  Clint Rivers, currently CEO of Wayne Farms LLC has been designated to lead the combined enterprise that will operate as a private Company. His challenges will be to integrate companies with widely different internal culture and to generate synergy from improved sourcing of ingredients and a rational marketing program. Given that Continental Grain has attempted two previous IPOs for Wayne Farms the transaction will have settled the future of their chicken subsidiary. Cargill operates broiler operations in the U.K., Thailand and Central America in addition to beef and other agribusiness operations. The Company has a deep bench of managers and experience that will be beneficial to the combined enterprise. The Cargill philosophy and business practices will positively influence the culture, image and long-range strategy of what is generally regarded as an efficient enterprise but dominated by the CEO who is the principal individual shareholder. Approximately ten percent of the equity of SAFM is currently held by insiders and with 80 percent by institutions.

 

The Wall Street Journal reported that Sanderson Farms was considering a strategic alternative on June 22nd when it hired Centerview Partners for guidance. Sanderson Farms has previously rejected unsolicited takeover offers from investment groups based on the Board considering that offers undervalued the company.

 

Effective 11H00 on Monday, August 9th following announcement of the acceptance, Sanderson Farms opened at $195.50 having closed on Friday, August 6th at $182.23.  Market capitalization was $4,370 million on August 9th with inconsequential long-term debt of $75 million and assets of $2,003 million as of April 30th.  SAFM has traded over 52-weeks in a range of $112.30 to $196.33 with a 50-day moving average of $184.13 reflecting favorable metrics in the broiler industry.  On a trailing 12-month basis, revenue attained $3,940 million.  The company posted an operating margin for the past twelve months of 6.9 percent and a profit margin of 4.2 percent.  The return on assets was 8.5 percent and on equity 11.6 percent. For the first half of Fiscal 2021 ending April 30th SAFM recorded a net profit of $106 million on revenue of $2,043 million.

 

(Financial results for the most recent quarter can be accessed by entering ‘Sanderson’ in the SEARCH block).


 
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