Acquisition prospects for Pilgrim's creates buzz

by MEAT+POULTRY Staff
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A March 31 report from Bloomberg was not an early April Fool’s gag, as its speculation about potential acquisition targets for Pilgrim’s Pride Corp., Greeley, Colo., covers many possibilities and is substantiated by financial analysts following the company. After losing the 2014 bidding war with Tyson Foods to acquire Hillshire Brands Co., insiders quoted in the story address many possible targets for the company, a subsidiary of JBS SA, and the sights are not necessarily set only on poultry firms.

Subsidiaries of Smithfield Foods Inc. are not out of the question, according to the story, and neither is AdvancePierre Foods. If poultry growth is part of the plan, Sanderson Farms Inc. may be part of the company’s future deals. This past July, JBS announced plans for Tyson’s poultry units in Mexico (Tyson de Mexico) and Brazil (Tyson do Brazil) to be acquired through Pilgrim’s Pride for $575 million
President and CEO, Bill Lovette has openly said in conference calls discussing earnings and strategies that the company is on the lookout for acquisitions when it makes sense for the company and its shareholders. When the company acquired the Tyson units in Mexico and Brazil, Lovette said the deal demonstrated its “continued commitment to our growth strategy of disciplined acquisitions.”

Brett Hundley, a Richmond, Va.-based analyst with BB&T Capital told Bloomberg Pilgrim’s growth strategy definitely includes more deals moving forward.

“The Street wants to see them diversify their platform,” said Hundley, “moving into beef, pork, more value-added foods.”

Gimme Credit’s Vicki Bryan was quoted in the story projecting Pilgrims will have $720 million of free cash flow available for acquisitions, with room to increase debt, which would put Sanderson, valued at $1.8 billion and Oaktree Capital’s AdvancePierre, for sale for approximately the same amount, within financial reach.

Ken Shea, an analyst for Bloomberg Intelligence, was also quoted in the story: “To me it screams that you should diversify into more cash-flow stable businesses and more into consumer goods, instead of just being a pure-play in chicken. That’s why Tyson did what it did.”
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