Cargill Inc. is forming a joint venture to acquire the nation's third largest chicken producer, further expanding its vast meat empire.
The Minnesota-based agribusiness is joining Continental Grain to buy Sanderson Farms for $4.53 billion.
Cargill is no stranger to running poultry operations. In addition to its large U.S. turkey business, the company has large chicken-processing plants throughout Asia, Latin America and Europe.
"Expanding our poultry offerings to the U.S. is a key enabler of our ability to meet customer and consumer demands," David MacLennan, chief executive of Cargill, said in a statement.
Cargill is one of the nation's largest producers of beef, turkey and soon-to-be chicken. It sold its U.S. pork business in 2015 to JBS USA.
The joint venture buyers will combine Sanderson Farms with Wayne Farms — an existing poultry subsidiary of Continental Grain's.
If approved by regulators, the combined company would control nearly 15% of all U.S. broiler production, according to data from Watt Poultry USA. Tyson Foods accounts for one-fifth of U.S. production, followed by Pilgrim's Pride's with 16% of the nation's output.
That's not likely a large enough market share to raise an antitrust issue, Credit Suisse analysts said in a recent report, but recent U.S. Department of Justice investigations into price-fixing allegations could heighten scrutiny of any mergers in the meat industry.
While Continental brings with it a half-century of experience in the U.S. chicken industry, Cargill offers its deep ties with retail and food service customers.
The combine company will have plants in Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina and Texas that will supply meat to retail stores, restaurants, institutions and distributors.
Continental and Cargill, both privately held, will buy Sanderson Farms for $203 per share in cash, which represented a 30% premium over its stock value on June 18 — the last full day of trading before media reports surfaced with speculation of the impending deal.
Shares of Laurel, Miss.-based Sanderson Farms rose 7% in morning trading.
Upon the deal's closure later this year or early 2022, Sanderson Farms will become a private company, led by Wayne Farms CEO Clint Rivers, and will no longer be traded on the NASDAQ exchange.
Chicken prices have surged in recent months on the reopening of restaurants and the new chicken products at fast-food restaurants. This has led to a shortage of various chicken parts, including wings, putting pressure on prices.
