May 14, 2008

Pilgrim's Pride to sell 7.5 million shares to pay debt
 

Pilgrim's Pride shares fell 6 percent on Tuesday morning after the company announced its decision to sell 7.5 million shares to pay its debt.

Pilgrim's Pride has been incurring losses due to soaring costs for corn and soymeal and as a result has priced a deal to sell 7.5 million shares at US$24 each, totalling to US$180 million. Lehman Brothers is the sole underwriter for the stock offering, expected to close on the coming Friday (May 16, 2008).

The stock offering will be used to pay down debt and to boost its cash reserves. For the quarter ended March 29, Pilgrim's Pride reported a net debt of US$1.6 billion. The company also accumulated a net loss of US$143.8 million since last September.

The deal was priced at a 7 percent discount from Pilgrim's Pride closing stock price on Monday and will boost the company's total common share count by 11 percent to 74 million shares outstanding.

J.P. Morgan analyst Pablo Zuanic estimates that the stock deal would not have any effect on the company's earnings.

Pilgrim's Pride stock has fallen 16 percent in the past 12 months compared to Sanderson Farms and Tyson's increase of 35 percent and 17 percent respectively.

Pilgrim's Pride shares fell US$160 to US$24.26 in late morning trades.