(Bloomberg) — Pilgrim’s Pride Corp.’s stock plunged the most in 20 months after majority owner JBS SA withdrew its offer to buy the shares it doesn’t already own in the second-largest U.S. chicken producer.
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Pilgrim’s Pride fell 16% to $23.38 at 1:35 p.m. trading in New York, its biggest intraday decline since June 2020. The proposed transaction fell apart after the companies failed to agree to terms on JBS’s unsolicited $28.50-a-share offer, with the Brazilian meat giant disclosing the deal’s collapse Thursday after the end of U.S. trading. A Pilgrim’s Pride committee concluded that the offer “significantly undervalued” the shares, according to a regulatory filing.
The failure of JBS and Pilgrim’s Pride to reach a deal means one of the last “pure play” U.S. chicken producers will remain standing as President Joe Biden’s administration has been critical of concentration in the U.S. meat industry. The breakdown of the acquisition plan also comes during a boom in profits for the industry thanks to a surge in poultry demand and prices.
“We are little surprised” a deal couldn’t be reached, “particularly in light of strong underlying fundamentals,” Kenneth Zaslow, an analyst at BMO Capital Markets, said in a note Friday. “We are uncertain of the motivation or the lack thereof for both sides.”
Zaslow, who has a $28 price target on Pilgrim’s stock, reiterated his “market perform” rating on the Colorado-based company.
JBS in August offered to buy all outstanding common shares in Pilgrim’s Pride for $26.50 apiece and subsequently sweetened the price to $28.50 in November. JBS held about 80% of Pilgrim Pride’s stock as of its latest filing, according to Bloomberg data.
The end of the JBS offer and “strong operating backdrop” prompted Stephens Inc. analyst Ben Bienvenu to lift his recommendation on Pilgrim’s stock from “equal-weight” to “overweight.” He sees the shares reaching $35, up from his prior price target of $30.
(Updates shares and adds analyst comment in last paragraph. An earlier version corrected company spelling.)
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