October 18, 2006

Gold Kist to continue lawsuit against Pilgrim's Pride despite deal clearance

Although the US Department of Justice has cleared Pilgrim's Pride Corp.'s hostile takeover attempt on Gold Kist, the latter's lawsuit against it would still proceed, Atlanta-based Gold Kist Inc said Tuesday Pilgrim's Pride, the second largest chicken producer in the US, launched a hostile US$20 per share tender offer for Gold Kist Inc., the nation's No. 3 chicken processor, in September after Gold Kist rejected its US$1 billion offer. 

Gold Kist believes Pilgrim's takeover is unlawful. It is suing the company under Section 8 of the Clayton Act, which bans directors sitting on the board of two competitive companies of a certain size. Pilgrim has been trying to get its own executives on the board of Gold Kist.

The DOJ had allowed Pilgrim's Pride early termination of the waiting period stipulated in the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR).

Under HSR, parties involved in mergers, acquisitions or tender offers are required to wait 30 days after filing to assess potential antitrust issues. Deals cannot be completed until the waiting period expires.

Although by doing so, DOJ has basically given the go-ahead for Pilgrim's Pride to buyover Gold Kist, Pilgrim is still liable for the Clayton Act.