JBS Offers to Buy Out Pilgrim’s Pride, With No Premium Attached

Brazil · CORPORATE

The Brazilian meatpacker wants the roughly 18 percent of the US chicken producer it does not already hold. The offer is worth about what the shares already cost.

JBS has offered to buy the Pilgrim’s Pride shares it does not already own and take the company private. The proposal is all-stock, non-binding, and carries no meaningful premium.

JBS bid 2.086 of its own shares for each Pilgrim’s Pride share it does not hold, valuing the minority stake near US$1.2 billion. (Photo: Internet Reproduction)

What JBS actually proposed

JBS wrote to the Pilgrim’s Pride board with a non-binding proposal. It would acquire every share of common stock JBS and its affiliates do not already hold.

The consideration is stock, not cash. The ratio is fixed at 2.086 JBS Class A shares for each Pilgrim’s Pride share.

Non-binding matters. This is an opening position that the board can reject, and the ratio is not yet locked into an agreement.

Pilgrim’s Pride is one of the largest chicken producers in the United States, and JBS has controlled it for years.

What JBS N.V. does. JBS N.V., together with its subsidiaries, engages in the processing of animal proteins, encompassing activities related to beef, pork, lamb, and poultry worldwide. The company is involved in the production and marketing of prepared foods and other related products, as well as operations in leather, collagen, hygiene and beauty products, metal packaging,…

What the US$1.2 billion figure measures

It values the minority stake JBS is trying to buy, not the whole of Pilgrim’s Pride. JBS already owns about 82 percent of the company.

The figure rests on closing prices on 18 August. JBS closed at US$13.66, which implies US$28.49 for each Pilgrim’s Pride share.

Because it is an all-stock offer, that number moves with the JBS share price rather than sitting fixed in dollars.

The part minority holders will notice

The implied US$28.49 is roughly the market price of a Pilgrim’s Pride share before the offer. JBS has not stated a premium, and no meaningful one is embedded.

Take-private offers usually pay shareholders something to give up a listed stock. This one asks them to swap into a different listed stock at par.

That is the argument the board now has to weigh, and the reason the outcome is not a formality.

An all-stock offer at par also transfers risk. Holders swap a poultry business for a share of a global meat group.

What happens to the Pilgrim’s Pride listing

If the deal completes, Pilgrim’s Pride stops trading as a separate company on the Nasdaq. Holders would end up owning JBS shares instead.

JBS itself listed in New York recently, so the shares being offered are traded rather than private paper.

For a US holder, that turns a domestic stock into exposure to a Brazilian-controlled multinational.

Why JBS would want this now

Full ownership removes the friction of running a listed subsidiary: separate reporting, a separate board, and minority interests to account for.

It also simplifies moving cash between the group’s US chicken business and the rest of it.

Pilgrim’s Pride reported net sales of US$4.6 billion in the second quarter. Its operating margin fell to 1.4 percent, from 10.8 percent a year earlier.

Adjusted EBITDA came to US$360 million, a margin of 7.8 percent. The chicken cycle has turned against the producer.

JBS reported a net loss of US$102 million in the second quarter despite record sales. Simplifying the structure is one lever it controls.

What has not been settled

There is no agreement, no timetable and no approved terms. The Pilgrim’s Pride board has to respond first.

Deals of this shape are normally reviewed by a special committee of independent directors. The buyer is already the controlling shareholder.

JBS also expects the deal to need a majority of the votes cast by shares it does not own. Its own shareholders do not vote on it.

No timetable, closing date or regulatory schedule has been published. The proposal is a letter, not an agreement.

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Sources

• www.sec.gov
• www.reuters.com