News 265 views update:Oct 2, 2006

Pilgrim's approaches Gold Kist shareholders directly

Pilgrim's Pride will approach Gold Kist shareholders directly with the intention of acquiring all outstanding Gold Kist shares for cash, in a deal worth US$1 billion.

The hostile takeover bid comes after management negotiations about the sale failed.
Pilgrim's said it would offer $20 a share for Gold Kist and assume $144 million of Gold Kist debt.
Gold Kist on Thursday advised stockholders to take no action on Pilgrim's offer and said that its board of directors would review the bid and make a recommendation to stockholders on or before October 12.
At least one analyst doubted that the $20-per-share bid would be sufficient. The bid amounted to a 55% share price premium when it was first offered, but since then, share prices have increased dramatically to around $20.
Also, Gold Kist holders may demand more now that the poultry industry is recovering from depressed conditions caused by slow exports earlier this year.
"I think Pilgrim's Pride will have to come back and sweeten the deal," said Thomas Morabito, food analyst with Susquehanna Financial Group. "You may have to get closer to $22 to $23 a share, and then we think the deal gets done."
To correct a glut of meat earlier this year poultry producers have cut production. That excess of meat was due in part to a slowdown of exports caused by bird flu overseas and damage to port facilities in the US Gulf Coast by Hurricane Katrina.
Both Pilgrim and Gold Kist lost money in the quarter ended July 1.
Pilgrim's and Gold Kist are respectively second and third top US producers, trailing Tyson Foods.

Editor WorldPoultry

Or register to be able to comment.