October 23, 2009

Pilgrim's Pride Corp. obtained court permission to poll its creditors on a bankruptcy-exit plan that would sell a majority stake in the company to Brazilian beef producer JBS SA.

Judge D. Michael Lynn of the US Bankruptcy Court in Fort Worth, Texas, said the chicken producer may send its disclosure statement, or a plain-language reading of the restructuring plan, to stakeholders for a vote, according to a Wednesday entry on the court's docket.

Pilgrim's Pride's shareholders are the only class of stakeholders entitled to vote because all classes of creditors are slated to receive full cash payment and are deemed to accept the plan.

Under its plan, Pilgrim's Pride would sell 64 percent of its new common stock to JBS for US$800 million. Current Pilgrim's Pride shareholders would own 36 percent of the reorganized company.

The plan would allow Pilgrim's Pride founder Lonnie "Bo" Pilgrim to retain a portion of the company. As of January, Pilgrim and his family members controlled the vast majority of the company's common stock.

A court hearing to consider approving the plan is scheduled for Dec. 8. The Pittsburgh, Texas, company aims to exit Chapter 11 protection by the end of the year.

Earlier this month, Pilgrim's Pride received antitrust clearance from the US Federal Trade Commission and US Justice Department to pursue the transaction with JBS.

The deal would further expand JBS' presence in the US In 2007, JBS bought Swift & Co. for US$225 million, and it took on the US beef-processing operations of Smithfield Foods Inc. last year.

Pilgrim's Pride used bankruptcy to realign its operations by closing some processing plants and selling off others. The company sold its Farmerville, La., plant to Foster Farms for US$80 million in a deal backed by the state of Louisiana.

Pilgrim's Pride filed for bankruptcy protection last December, caught between contracts that locked it into high rates for feed and other commodities and falling prices for its products.