Advertisement
YOU ARE HERE: LAT HomeCollections

Gold Kist OKs takeover deal by Pilgrim's Pride

December 05, 2006|From Reuters

CHICAGO — U.S. chicken producer Gold Kist Inc. agreed to be bought by larger rival Pilgrim's Pride Inc. in a sweetened $1.1-billion deal that ended a four-month takeover battle, the companies said Monday.

The deal, which would pay Gold Kist shareholders $21 a share, probably would make Pittsburg, Texas-based Pilgrim's Pride the largest U.S. chicken company by pounds of poultry produced, eclipsing Tyson Foods Inc., according to an industry trade group.

The deal exceeds the $1 billion, or $20 a share, that Pilgrim offered in August when it launched its takeover bid for Atlanta-based Gold Kist.

Gold Kist directors opposed the earlier offer, saying it did not reflect the value of the company, and urged shareholders to reject it.

Analysts liked the deal because consolidating business could improve efficiencies and lower costs.

"To the extent this transaction obviously helps consolidation in a challenging industry, it is a good development," Eric Katzman, a Deutsche Bank food analyst, said in a research report.

The buyout comes at a time when meat companies are being hurt by an excess of meat and rising prices for feed, particularly corn.

Those conditions may have prodded Gold Kist's directors to end their resistance to a takeover by Pilgrim's Pride, one industry economist said.

"With corn prices going up, the $21 looked a lot better now than it would have looked a couple of months ago," said Paul Ah, an economist at consulting firm Poultry Perspective.

Pilgrim's Pride executives estimate that the company will produce about 25% of U.S. chicken after the acquisition, compared with Tyson's 23.5%.

Gold Kist's board members approved the higher bid after Pilgrim's Pride said last week that 67% of Gold Kist's shares had been tendered under the initial $20-a-share offer, Pilgrim's Pride Chief Financial Officer Richard Cogdill said.

Pilgrim's Pride will also assume $144 million of Gold Kist's debt.

Pilgrim's Pride shares closed up nearly 10% at $27.90, while Gold Kist shares finished up 4.5% at $20.87.

Advertisement
Los Angeles Times Articles
|
|
|