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Pilgrim's Pride's (PPC) Latest Buyout to Aid European Operations

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Strengthening operations through alliances and acquisitions is a common move undertaken by a number of food companies. Pilgrim's Pride Corporation (PPC - Free Report) is no exception, which has concluded the proposed buyout of Kerry Consumer Foods’ Meats and Meals business in the U.K. and Ireland. The acquired business will solidify Pilgrim’s Pride’s footing by operating as a business division under the company’s European operations.

We note that the deal was valued at £680 million (or nearly $932 million based on the exchange rates on Sep 24, 2021).

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More on the Acquisition

Kerry Meats is a leading maker of branded and private label meats, meat snacks and food-to-go products in the U.K. and Ireland, whereas Kerry Meals is a chilled and frozen ready meals business in the U.K. Both these businesses, together, generated sales of above £725 million annually for the year ended Dec 31, 2020, and have more than 4,500 team members. The Kerry business also has a successful record of innovation, including the launch of its branded meat-free products.

The buyout will help Pilgrim's Pride solidify its position with an important value-added protein and integrated prepared foods business, thanks to the renowned brands like Denny, Richmond and Fridge Raiders. It is likely to enhance the buyer’s portfolio diversity with an opportunity to place itself as a major prepared foods and branded product company. The addition of Kerry Consumer Foods’ Meats and Meals business will help Pilgrim's Pride develop innovative products with combined expertise and help achieve growth objectives.

This is likely to be a valuable addition to the company’s European operations. In the second quarter of 2021, net sales from the U.K. and Europe operations rose from $757.2 million to $935.8 million. The company highlighted that its combined European business gained on the operational improvements and the rebound in foodservice volumes in the U.K. that were countered by elevated feed costs as well as reduced pig pricing.

Pilgrim’s Pride on Growth Path

Pilgrim's Pride’s customer-centric approach encourages the company to come up with unique offerings that provide competitive advantages. In fact, the company’s focus on key customers is a pathway for refining the portfolio, alongside creating competitive advantages over its peers, especially amid the pandemic-led disruptions.

Apart from this, the company has been steadily augmenting marketing support of its brands, as they expand and enter new regions. Additionally, it resorts to frequent supply-chain improvements to enhance efficiency and reduce costs. In this respect, it has been progressing well with developing the automation technology for its processing plants. The introduction of such advanced technology is likely to increase efficiency and aid in combating labor availability issues. Such upsides, together with dedicated efforts such as zero-base budgeting and benefits from acquisitions, are expected to continue working in favor of Pilgrim’s Pride.

Shares of this Zacks Rank #1 (Strong Buy) company have rallied 27.8% in the past three months compared with the industry’s rise of 6.1%.

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