Meat Giants Get Bigger – Cargill and Continental Grains buy Sanderson Farms for $4.53B

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Cargill and Continental Grain Company have jointly agreed to acquire Sanderson Farms, valuing the US poultry producer at $4.53bn at a time when demand for chicken meat has been soaring. As part of the transaction, Sanderson Farms will combine with Wayne Farms, a subsidiary of investment group Continental Grain, to form a new privately held poultry business. Under the terms of the deal, Sanderson Farm shareholders will receive $203 per share in cash, a 30.3 per cent premium to the company’s stock market price on June 18, before media reports that it was considering a sale. The deal will allow Cargill to expand its international poultry business in the US, which is one of the world’s fastest-growing markets. “Expanding our poultry offerings to the US 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,” said David MacLennan, chair and chief executive of Cargill. The deal comes as Americans have been consuming chicken — seen as a healthier alternative to beef — at record levels both at home and in restaurants. The boost in demand for the meat has also been helped by the reopening of restaurants and fast-food chains making fried chicken, although it has also led to shortages in certain parts of the country. Sanderson Farms, which is the third-largest US poultry producer behind Tyson Foods and Pilgrim’s Pride, had been approached by a number of suitors. Analysts see the group based in Laurel, Mississippi, as one of the best performers in the sector. Credit Suisse wrote in an analyst report that Sanderson Farms had “excellent facilities, good labour relations, and strong customer relationships” as well as “sales up 60 per cent over the past eight years through capital investments and underlying organic growth”.