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Sanderson Farms (SAFM) Likely to Sell Business for $4.5 Billion
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Renowned fresh and frozen chicken products company, Sanderson Farms, Inc. , is reportedly exploring potentials of a sale. Market sources reveal that the company is in advanced talks with prospective buyers like Cargill Inc. and agricultural investment firm Continental Grain Co., the owner of Wayne Farms chicken company in Georgia.
Sources have highlighted that this potential deal is expected to be valued at nearly $4.5 billion and is likely to be finalized soon. The expected sale price will value the company at about $203 per share. Let’s delve deeper.
Possible Divestiture on the Cards
If sources are to be believed, Sanderson Farms has apparently been drawing the attention of a number of potential investors since June. The talks of a possible divestiture of the company comes at a time when it is seeing rising demand for its products, as restaurants reopen and outdoor dining gathers pace amid relaxation of pandemic-led restrictions. The prices of chicken wings and breasts are rising as fast food chains and restaurants go back to making fried-chicken products.
During second-quarter fiscal 2021, the company reported net sales of $1,133.9 million, which rallied 34.2% year on year. The quarterly performance was supported by export demand recovery, improved poultry market conditions as demand from foodservice channels increased and higher selling prices.
Processing about 13.6 million chickens per week across 13 poultry plants, Sanderson Farms is the third largest chicken producer in the United States. Other prominent players in the industry are Tyson Foods, Inc. (TSN - Free Report) and Pilgrims Pride Corporation (PPC - Free Report) . Sanderson Farms offers its products to supermarket chains such as Walmart Inc. (WMT - Free Report) and Albertson as well as restaurant suppliers like Sysco. It is also known for its processed and prepared chicken products available in varied sizes that are sold in foreign markets namely Mexico, Middle East and Central Asia. With strong business network and presence in the chicken market, Sanderson Farms is clearly a lucrative inclusion to any company.
Image Source: Zacks Investment Research
Sanderson Farms is witnessing higher feed costs. During the first quarter, the company’s average feed cost per pound of poultry products processed increased 1.3% year over year. Prices paid for corn and soybean meal were up 8.9% and 27.5%, respectively. Management, in its last earnings call, had projected continued inflationary trends in feed prices. Tight labor market conditions have also been a concern for the company. Such headwinds along with tough operating conditions induced by the pandemic, might have pushed the company to consider a sale. That being said, the company is yet to make any official statement on the matter.
Shares of this Zacks Rank #2 (Buy) company have gained 6.8% in the past three months against the industry’s decline of 4.8%.
Image: Bigstock
Sanderson Farms (SAFM) Likely to Sell Business for $4.5 Billion
Renowned fresh and frozen chicken products company, Sanderson Farms, Inc. , is reportedly exploring potentials of a sale. Market sources reveal that the company is in advanced talks with prospective buyers like Cargill Inc. and agricultural investment firm Continental Grain Co., the owner of Wayne Farms chicken company in Georgia.
Sources have highlighted that this potential deal is expected to be valued at nearly $4.5 billion and is likely to be finalized soon. The expected sale price will value the company at about $203 per share. Let’s delve deeper.
Possible Divestiture on the Cards
If sources are to be believed, Sanderson Farms has apparently been drawing the attention of a number of potential investors since June. The talks of a possible divestiture of the company comes at a time when it is seeing rising demand for its products, as restaurants reopen and outdoor dining gathers pace amid relaxation of pandemic-led restrictions. The prices of chicken wings and breasts are rising as fast food chains and restaurants go back to making fried-chicken products.
During second-quarter fiscal 2021, the company reported net sales of $1,133.9 million, which rallied 34.2% year on year. The quarterly performance was supported by export demand recovery, improved poultry market conditions as demand from foodservice channels increased and higher selling prices.
Processing about 13.6 million chickens per week across 13 poultry plants, Sanderson Farms is the third largest chicken producer in the United States. Other prominent players in the industry are Tyson Foods, Inc. (TSN - Free Report) and Pilgrims Pride Corporation (PPC - Free Report) . Sanderson Farms offers its products to supermarket chains such as Walmart Inc. (WMT - Free Report) and Albertson as well as restaurant suppliers like Sysco. It is also known for its processed and prepared chicken products available in varied sizes that are sold in foreign markets namely Mexico, Middle East and Central Asia. With strong business network and presence in the chicken market, Sanderson Farms is clearly a lucrative inclusion to any company.
Sanderson Farms is witnessing higher feed costs. During the first quarter, the company’s average feed cost per pound of poultry products processed increased 1.3% year over year. Prices paid for corn and soybean meal were up 8.9% and 27.5%, respectively. Management, in its last earnings call, had projected continued inflationary trends in feed prices. Tight labor market conditions have also been a concern for the company. Such headwinds along with tough operating conditions induced by the pandemic, might have pushed the company to consider a sale. That being said, the company is yet to make any official statement on the matter.
Shares of this Zacks Rank #2 (Buy) company have gained 6.8% in the past three months against the industry’s decline of 4.8%.
You can see the complete list of today’s Zacks #1 Rank stocks here.