September 29, 2006
Pilgrim to launch hostile bid for Gold Kist after gentle persuasion fails
Pilgrim's Pride Thursday launched a hostile US$1 billion offer for Gold Kist shares after six weeks of talks between the two companies failed to yield results.
If successful, the marriage between the two companies would help Pilgrim's Pride become America's top poultry producer, overtaking market leader Tyson and garnering a quarter of chicken sales in the country.
In fact, Pilgrim has been pursuing Gold Kist for more than two years, and has had two proposals spurned by the latter. Now, Pilgrim has discarded the flowers and taken up the club, announcing plans for a US$20-a share bid on August 18.
Pilgrim's offer, while not exactly princely, is not meagre either. Its tender offer retained the US$20-a-share terms and would assume US$144m in debt. The offer to shareholders extends through Oct 27.
The share price offered is Gold Kist's 52-week high and represented a 55 per cent premium to the stock's pre-announcement close on Aug 18. Gold Kist's shares have traded at a little over US$20 over the past six weeks.
Gold Kist had expressed its annoyance with Pilgrim's impatience, and said last month it was "surprised and disappointed" that Pilgrim had chosen to buy over shareholders after agreeing to mutually explore a proposal made in July.
The company has hired Gleacher, an investment bank, for advice, but is not about to shy away from negotiations.
Pilgrim, meanwhile, said that Gold Kist's half-hearted attempts at reaching an agreement had driven it to do otherwise.
The company would have preferred to work with Gold Kist and its board of directors to negotiate a mutually beneficial agreement, said a statement from OB Goolsby, Pilgrim's president and chief executive officer.
The US chicken industry has consolidated to the point where the top five players account for half of sales in the country. Pilgrim more than doubled the size in the stake of its chicken business with the December 2003 purchase of ConAgra's poultry unit. Acquiring Gold Kist would have given it the grower-base in the south-eastern part of the US.
Gold Kist, which converted from a co-operative in 2004, has lost market share in recent years. Farmers account for around a fifth of its shareholder base.