Pilgrim's Pride to buy Gold Kist

0 Comments | Deseret News (Salt Lake City), Dec 5, 2006 | by Harry R. Weber Associated Press

ATLANTA -- Poultry producer Pilgrim's Pride Corp. won its pursuit of the reluctant Gold Kist Inc., saying Monday its rival had accepted a sweetened $21 per share buyout offer worth $1.1 billion. There could be job cuts in corporate positions after the deal closes.

The combined company will be the world's leading chicken company in terms of production and the third-largest U.S. meat protein company by revenue, according to the companies, which say the combination will help Pilgrim's Pride compete better in the U.S. and abroad. It would employ 56,000 people.

The offer is $1 per share higher than Pilgrim's Pride's initial offer, first announced in August.

Atlanta-based Gold Kist had initially said it wanted to remain on its own, but by last Wednesday, Gold Kist shareholders had tendered 34.1 million shares, or 67 percent of the company's stock to Pilgrim's Pride under its $20 a share offer.

Pilgrim's Pride, which has a distribution center in Salt Lake City, said the deal will begin helping earnings after the first full year of operations. It expects to save $50 million annually from the acquisition.

Pilgrim's Pride will also assume about $144 million in Gold Kist's debt.

O.B. Goolsby, Pilgrim's Pride's president and chief executive officer, said in a telephone interview that there could be job cuts in corporate positions in functions such as human resources, information technology and accounting because of duplication from the two companies. He did not specify a number.

"We have stated that the operational work force should expect to remain very close to the current situation," Goolsby said. "We have no plans to close any facilities, and we will need the operational management that run those facilities today."

But, he added, "We do think there is some duplication, primarily in the corporate area."

Asked if that meant job cuts could result in certain corporate functions, Goolsby said, "That's a fair way of putting it. Yes."

Pilgrim's Pride has about 40,000 employees. Gold Kist has about 16,000 employees.

The deal, subject to certain closing conditions, could close within days of Pilgrim's Pride receiving at least 90 percent of Gold Kist shares tendered, Goolsby said, adding that the tender expires Dec. 27.

The new Pilgrim's Pride offer represents a roughly 62 percent premium over Gold Kist's closing stock price on Aug. 18, the last day of trading before Pilgrim's Pride notified Gold Kist's board of directors that it was offering to purchase the company. Gold Kist's shares have risen steadily since that time.

Pilgrim's Pride shares rose $2.52, or 9.9 percent, to close at $27.90 Monday on the New York Stock Exchange, while Gold Kist shares rose 90 cents, or 4.5 percent, to close at $20.87 on the Nasdaq Stock Market.

The offer is subject to certain closing conditions. The deal has already been approved by the boards of the two companies.