Cargill, Continental Grain to Acquire Chicken Producer Sanderson Farms For $4.3B

By Lynda Kiernan-Stone, Global AgInvesting Media

Cargill and Continental Grain have announced their agreement to acquire chicken producer Sanderson Farms for $203 per share, or a total consideration of $4.53 billion.

The transaction will be conducted through a joint venture between Cargill and Continental Grain which, once acquired, will merge Sanderson Farms with Continental Grain subsidiary Wayne Farms to create a privately held, best-in-class poultry company with a significant asset base.

Once the transaction gains Sanderson stockholder approval and closes in either late 2021 or early 2022, the combined company will be led by Clint Rivers, CEO of Wayne Farms since 2017 and current chairman of the National Chicken Council.

"We are very happy to partner with Cargill with whom we have had a decades-long relationship between two family-owned companies,” said Paul Fribourg, chairman and CEO of Continental Grain. “Sanderson Farms' operations, best-in-class assets and valuable brand have underscored their success, and we have the highest respect for Joe Sanderson, and the business and team he has built as the third generation CEO.”

Fribourg continued, "Wayne Farms has been one of the most important and successful parts of Continental Grain for almost 60 years, so bringing together two great partners with two great poultry companies will ensure good things for our customers, our grower partners, and our employees."

As the third-largest poultry producer in the U.S., Sanderson Farms produces 94.31 million pounds of chicken per week, supplying not only Walmart but some of the largest food suppliers in the U.S., such as US Food Holding Corp. and Sysco, giving it a place in the competitive arena with Tyson Foods and Pilgrim’s Pride.

By increasing its scale through the merger with Wayne Farms, the resulting new entity will command a 15 percent share of U.S. chicken production, according to Watt Poultry USA, reports the Wall Street Journal, with Pilgrim’s Pride holding about 16 percent, and Tyson holding approximately 20 percent of the market as we emerge into a period of strong demand for chicken - reflected in Sanderson Farms’ second fiscal quarter sales of approximately $1.14 billion - 34 percent higher than sales of about $845 million a year before.

However, upon examination, it can be said that the Sanderson Farms/Wayne Farms merger will have an advantage due to the agricultural connections it will gain through Cargill and Continental Grain.

Wayne Farms, which has roots in the poultry sector reaching back more than a century, has been a key part of Continental Grain for nearly 60 years. And, for example, having Continental as a parent company could help offset rising feed prices, which are expected to be 7.5 percent higher per each pound of chicken produced this year. While Cargill has a global presence partnering with food, agriculture, financial, and industrial customers in more than 125 countries.

In a broader scope, the companies stated that the merged entity will benefit from their complementary operating cultures, and their combined industry-leading management team and workforce, while being well-positioned to enhance customer service to retail and food service outlets, and drive organic growth in an industry that is central to widely adopted consumer trends of health, sustainability, and the versatility of chicken.

Joe Sanderson, chairman and CEO of Sanderson Farms, commented, "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."

The new company also will control state-of-the-art operations and teams across a network of poultry processing plants and prepared food plants in Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, and Texas.

"At Cargill, we are committed to nourishing the world in a safe, responsible and sustainable way," said David MacLennan, chairman and CEO, 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."