November 21, 2003
US Pilgrim's Pride Corp To Acquire ConAgra Chicken Business
Pilgrim's Pride Corp., the United States' Texas-based poultry company that is buying the ConAgra Foods Inc. chicken business in Arkansas and several other states, expects to take control of that company's poultry plants in El Dorado, Batesville and Clinton on November 24.
Pilgrim's Pride is increasing its share of Arkansas poultry production; the country's second largest, even as rising chicken prices and new markets in Africa and Asia help local companies increase their potential for sales.
Wholesale chicken prices have risen 10 cents since last year to 63.54 cents a pound, according to the U.S. Department of Agriculture. Last year dated November 10; wholesale prices were 53.01 cents per pound.
The ConAgra acquisition will lift Pilgrim's Pride weekly Arkansas chicken processing to 4.2 million from a current rate of 1.7 million per week, said Pilgrim's Pride officials. According to the USDA, 1.18 billion birds were slaughtered in Arkansas in 2002.
Before the deal, Pilgrim's Pride had one chicken facility in De Queen in southwest Arkansas, 50 miles north of Texarkana and about eight miles east of the Oklahoma border.
On November 6, Pilgrim's Pride got part of the financial architecture in place for the ConAgra deal when the company sold $100 million in notes that mature in 10 years and carry a 9.25% coupon.
Funds raised from the debt sale will be used to pay ConAgra's cash portion of the deal. The securities were sold to institutional investors. Funds for the sale are in escrow awaiting completion of the deal, said Pilgrim's Pride Chief Financial Officer Richard A. Cogdill. "We don't see any problems in taking over the plants," Cogdill said.
Pilgrim's Pride officials said there were no plans for job cuts at this point.
To get the plants, which employ about 1,200 people, Pilgrim's Pride is holding a special shareholders meeting Thursday, seeking approval for a key financial plank in the $590 million deal that was announced last summer.
If approved, Pilgrim's Pride will issue shares of the company's common stock to ConAgra, an Omaha, Neb.-based company.
The deal will make Pilgrim's Pride the country's No. 2 poultry producer behind Springdale based Tyson Foods Inc.
Pilgrim's Pride produces 11.7 million chickens a week in the United States, and the deal will take production up to 30 million birds a week, said Cogdill.
After the deal closes, Pilgrim's Pride will employ about 40,000 people nationwide and operate plants and offices in several other states including Arizona, North Carolina, Pennsylvania, Virginia and West Virginia, as well as Mexico.
Company officials expect the vote to go off without a hitch.
Pilgrim's Pride Chairman, Lonnie "Bo" Pilgrim and his son, director Lonnie Ken Pilgrim, collectively own most of Pilgrim's Pride's Class A and Class B stocks.
The two Pilgrim family members own, or control collectively, 63.7% of the Class A common stock and 62.2% of the Class B common stock, according to the company.
Also on the agenda, shareholders will vote on fusing Pilgrim's class A and class B common stock into a single class of common stock. "This will give the stocks greater liquidity in trading," said John Bierbusse, an analyst at A. G. Edwards & Sons Inc. in St. Louis.
Each share of Class A stock, which carries one vote per share, and each share of Class B stock, which carries 20 votes per share, will be reclassified into one share of new common stock and will allow the holders at the time of reclassification 20 votes for each new share.
The New York Stock Exchange has already approved Pilgrim's proposed plan for combining the two classes of common stock into a single security under a new ticker symbol, PPC.
Dual stock class systems have long been a target of criticism by investors because they say the systems give too much authority to controlling family members.
Tyson Foods uses a dual stock class system, wherein retired Senior Chairman Don Tyson retains majority-voting control through a separate stock class.