Poultry giant Sanderson Farms Inc. investigates, according to people familiar with the matter, a sale as the demand for chicken products increases.
Sanderson Farms has tapped Centerview Partners for advice on the potential sale and has attracted interest from hairdressers, including agricultural investment firm Continental Grain Co., which owns a smaller chicken processor, people said. The process may not result in a sale.
Mississippi-based Sanderson, the third-largest U.S. chicken producer by processing capacity, had a market value of about $ 3.5 billion. Dollars Monday afternoon, and a buyer is expected to pay a premium for it.
CHICKEN WING SHORT HANDLE AMERICA
Demand for chicken breast, wings, and other products has increased as pandemic limits are lifted and restaurants reopen, increasing sales and prices. At the same time, consumers have continued to spend more on groceries, as many still work from home. The cost of boned, skinless chicken breasts has more than doubled since the beginning of the year, and wing prices have reached records.
That helped Sanderson report better-than-expected sales last month.
Meat companies’ costs are also rising. Grain prices – typically the biggest expense in poultry farming – have risen over the past year, pushed higher by growing exports to China and bad weather for South American farmers. Lack of labor in rural areas, home to large meat plants, has forced poultry producers to increase wages and expand the benefits of recruiting and retaining workers. Some companies, including Sanderson, are making new investments in automation.
The U.S. chicken industry is dominated by a handful of major players, including Tyson Foods Inc., which processes about one-fifth of the country’s poultry, according to studies by Watt Poultry USA.
An agreement with Continental will merge Sanderson with Georgia-based Wayne Farms LLC, a poultry producer owned by Continental and forming a company that produces approx. 15% of the country’s chicken meat. Nr. 2-player Pilgrim’s Pride Corp. produces approx. 16% of the total country.
Sanderson in October 2020 said it rejected an unsolicited takeover method from Durational Capital Management, which the chicken producer said was too low.
Sanderson was founded in 1947 as a farm supply store. Joe Sanderson, grandson of founder DR Sanderson, has served as the company’s CEO since 1989 and chairman since 1998.
CLICK HERE TO READ MORE ABOUT FOX BUSINESS
Wayne Farms traces its roots to a feed milling company founded in 1895 that expanded into poultry and was acquired by Continental in 1981. In 2015, the company filed plans to raise $ 234 million in an initial public offering to Wayne with a portion of its growth strategy to consolidate smaller private and family-owned chicken companies, according to documents filed with U.S. Securities and Exchange Commission. Continental withdrew its IPO plan as the U.S. poultry industry struggled with outbreaks of bird flu that killed millions of birds and increased costs for poultry and egg businesses.
The U.S. poultry industry is facing scrutiny from the U.S. Department of Justice’s ongoing criminal investigation into allegations that executives at large chicken companies conspired to set prices. No one at Sanderson or Wayne is charged.