Joint Venture Buying Sanderson Farms

Cargill, Continental Grain Buying Sanderson Farms for $4.5 Billion

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Cargill Inc. and Continental Grain have reached a deal to buy Sanderson Farms, a poultry processor with facilities and contract growers across the Southeast. Sanderson and Wayne Farms, a subsidiary of Continental, will combine to become a new, private joint venture. (DTN file photo)

OMAHA (DTN) -- Cargill Inc. and the investment firm Continental Grain Co. on Monday announced they are joining to buy Mississippi-based chicken processor Sanderson Farms for $4.53 billion. Sanderson is already the third-largest chicken processor in the U.S., behind Tyson Foods and Pilgrim's Pride. The sale will combine Sanderson Farms with Wayne Farms, a subsidiary of Continental Grain, to form a new, private poultry business. The Wall Street Journal reported the newly formed company would produce 15% of the country's chicken, putting it just behind Pilgrim's Pride, which has about 16% of the market.

The announcement comes as demand for chicken products continues to rise, especially as fast-food restaurants seek to offer new chicken products that are cheaper than beef products.

Yet, the deal also comes as Congress and federal regulators have become more skeptical about consolidation in agriculture. The new venture would be heavily concentrated in the Southeast. Sanderson Farms has 13 processing plants in Mississippi, Texas, Louisiana, North Carolina and Georgia. The company also operates nine feed mills and 11 hatcheries. Sanderson Farms employs about 17,000 employees and contracts with more than 1,000 poultry growers.

Wayne Farms has 10 processing facilities across Alabama, Arkansas, Georgia, Mississippi and North Carolina, and employs more than 9,000 people.

"The combination of Sanderson Farms and Wayne Farms will create a best-in-class U.S. poultry company with a high-quality asset base, complementary operating cultures, and an industry-leading management team and workforce. The new company will be well positioned to enhance its service to customers across retail and food service and drive organic growth in an industry fueled by affordability and key consumer trends around the health, sustainability and versatility of chicken," the companies stated in a press release.

The deal announcement has been in the works for months. Cargill and Continental Grain will pay $203 a share for Sanderson Farms, which is a 30.3% premium to Sanderson Farms' share price of $155.74 on June 18, 2021. The companies stated they have the "committed equity and debt financing in place to complete the transaction" The sale is expected to close by the end of the year or early in 2022, depending on regulatory and shareholder approval. "At Cargill, we are committed to nourishing the world in a safe, responsible and sustainable way," said David MacLennan, chairman and CEO of Cargill. "Expanding our poultry offerings to the U.S. is a key enabler of our ability to meet customer and consumer demands. With these great businesses, and our strong partnership, we believe we will deliver a superior portfolio of products and services to our customers."

Continental Grain is a global investor in food companies with investments and ownership across an array of agricultural and food-processing companies. Wayne Farms has been part of Continental Grain's portfolio since 1965.

Sanderson Farms, back in May, reported $2 billion in net sales for the first six months of fiscal 2021. Net income for the first six months of the year was $106.4 million, compared to a $32.5 million loss for the first six months of fiscal 2020.

Joe Sanderson, chairman and CEO of Sanderson Farms -- and grandson of the company founder -- said the company has been driven to produce the best chicken products in a profitable manner. The sale delivers a significant value to the company's stockholders, he said, reflecting the work of the company's team, its assets, products and brand. "We are proud to be joining with Cargill and Continental Grain, and we are confident that they will be strong stewards of the Sanderson Farms team, brand and assets going forward. As part of the newly created company, Sanderson Farms and its new owners will remain committed to the employees, poultry producers, customers, communities, environment, and animals under our care, and to continuing to deliver the highest quality products and the best service in our industry to our customers," Sanderson said.

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Chris Clayton