Poultry Producer Sanderson Farms Considering Acquisition Suitors: Report

Sanderson Farms Inc. SAFM, the nation’s third-largest poultry producer, is reportedly considering putting itself up for sale.

Fowl Play: According to a Wall Street Journal report citing unnamed people familiar with the matter, the Laurel, Mississippi-based company is consulting with New York City financial planner Centerview Partners on a potential sale, with agricultural investment firm Continental Grain Co. identified as a potential suitor.

The Journal’s coverage added that the talks “may not result in a sale,” although the report also speculated that a deal with Continental could result in combining Sanderson with Georgia-based Wayne Farms LLC, a poultry producer owned by Continental, that would result in a new entity producing roughly 15% of the country’s chicken meat.

Sanderson rejected an unsolicited takeover bid from Durational Capital Management in October 2020, stating the offer was too low.

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Cock-A-Doodle-Doo! For any potential buyer, the company certainly has plenty of meat on the bone.

Sanderson, which has a market value of approximately $3.5 billion, reported fiscal second-quarter net sales of $1.13 million, up from $844.7 million one year earlier, and net income of $96.9 million or $4.34 per share, compared with net income of $6.1 million or 28 cents per share, for the second quarter of fiscal 2020.

“Improved poultry markets more than offset feed grain costs that were significantly higher compared to last year’s second fiscal quarter, resulting in increased operating margins,” said Joe F. Sanderson, Jr., chairman and CEO. “The improvement in the domestic poultry markets was driven largely by increased demand from food service customers, as U.S. consumers slowly returned to restaurants and several quick serve restaurant chains featured chicken sandwiches on their menus.

“In addition, export demand also improved during the quarter due to higher crude oil prices, improved liquidity as a result of currency valuations and some relief from COVID-19-related restrictions.”

Following the publication of the Journal’s report, an analyst at JPMorgan Chase & Co. raised its price target on the stock from $175 to $198 while maintaining an Overweight rating. However, a Bank of America Securities analyst was not swayed, maintaining a Neutral rating and a price target of $180.

At last check, Sanderson’s stock was trading up 9.49% at $82.39. 

The stock’s 52-week high is $186.72 and its 52-week low is $108.57.

(Photo by PublicDomainPictures/Pixabay.)