Pilgrim’s Pride Seals Deal with JBS

It appears as though Pilgrim’s Pride Corp. will be able to pull out of bankruptcy after agreeing to a deal with JBS SA, a Brazilian beef producer. JBS is purchasing a majority stake in Pilgrim’s Pride for $800 million.

According to an Associated Press story on the deal, one of the provisions of the agreement is that Pilgrim’s Pride’s creditors will be paid in full and current stock holders will receive new stock, which, according to the AP, is unusual “for a company in bankruptcy protection.” JBS SA announced another deal today, one that has the company merging with Bertin SA. Bertin SA is one of the largest producers of milk products, beef, and leather in Latin America. The combination of the two deals will make JBS one of the largest meat producers in the world.

JBS says that JBS-Bertin will indeed by the world’s largest meat producer in terms of income. JBS-Bertin expects an annual income of $28.7 billion, which would put it above Tyson Foods Inc. of Springdale, Arkansas. According to Arkansas Business online, Tyson’s revenue for fiscal 2008 was $27 billion.

The details of the deal: 1) Pilgrim’s Pride will sell 64 percent of the reorganized company’s stock to JBS for $800 million in cash; 2) current Pilgrim’s Pride shareholders will “receive shares in the remaining 36 percent of Pilgrim’s Pride valued at $450 million; 3) Pilgrim’s Pride’s debt of $1.5 billion will be paid off. In its entirety the transaction is worth $2.8 billion, according to JBS.

Pilgrim’s Pride filed for bankruptcy protection late last year. Prior to that, the company was the “nation’s largest chicken producer with about 23 percent of the U.S. market [.]” The deal provides JBS with an entry into the US chicken market through Pilgrim’s Pride. With these deals, JBS will now be the “largest beef producing company in Brazil, Australia, Argentina and Italy.”

According to Pilgrim’s Pride, “the deal is subject to antitrust clearance,” and earlier this year U.S. regulators sued to prevent JBS from acquiring a top beef producer. The reason the regulators gave for the suit was pricing concerns for producers and consumers. This caused the deal with National Beef Packing Co. to be dropped. Pilgrim’s Pride creditors holding claims will either be issued a new note or will be paid in cash, and Pilgrim’s Pride believes that if “U.S. bankruptcy court approves the deal, the company could emerge from court protection by December.”

Senior Chairman Lonnie “Bo” Pilgrim made the following statement about the deal, “While the past year has been a difficult time for everyone involved in our restructuring, I take pride in knowing that we have a plan in place to pay back our creditors in full and preserve a great deal of value for our existing stockholders[.]"

To read the AP story click here.
To read the Arkansas Business story click here.

Posted: 09/16/09