Pilgrim's Pride exits bankruptcy under JBS deal
NEW YORK/CHICAGO (Reuters) - U.S. chicken producer Pilgrim's Pride Corp said on Monday it has emerged from bankruptcy protection, just over a year after beginning the process.
The company's bankruptcy exit deal includes the sale of a majority stake to Brazilian meat company JBS SA for $800 million. Six members of the reorganized company's new board of directors will be selected by JBS.
Pilgrim's Pride, one of the largest U.S. chicken producers, said it has entered a $1.75 billion exit credit facility, and new shares in the company will begin trading on the New York Stock Exchange on Tuesday under the symbol "PPC".
"Pilgrim's Pride today is a stronger, leaner company with a growing customer base, improved capital structure and a culture built on results and accountability," the company's chief executive, Don Jackson, said in a statement.
The company filed for bankruptcy on December 1, 2008, after a year of losses because of high feed costs, low chicken prices and a heavy debt load. Pilgrim's Pride operated throughout the bankruptcy process, during which it closed and sold plants and reduced production.
"We were not just reshuffling the balance sheet. We actually restructured the company," said William Snyder, a managing partner at turnaround firm CRG Partners, who acted as chief restructuring officer at Pilgrim's Pride.
The company has also changed its product mix to focus on more profitable prepared foods, Snyder said.
Pittsburg, Texas-based Pilgrim's Pride, like other chicken producers, was hurt in 2008 and early 2009 as the recession ate into sales at restaurants and in export markets. In addition, it was burdened with debt, much of which was from its purchase a year earlier of smaller rival Gold Kist Inc.
Chicken companies responded to high feed costs and low chicken prices by cutting production and shortening contracts with customers to more quickly pass on the higher costs.
Overall U.S. chicken production is down 3.8 percent in 2009 from 2008.
The production cuts have helped, and the chicken industry is recovering. Competitors Tyson Foods Inc and Sanderson Farms Inc reported profits on chicken in their latest quarters compared with losses a year earlier.
"It is better than it was when they went into bankruptcy, in terms of the economic environment, but it is still a struggling economic environment," said Jim Robb, economist with the Livestock Marketing Information Center. "It is still going to be a challenge for the poultry business."
Unemployment remains high and consumers are still eating more at home rather than at restaurants, but that could change as the economy begins to pick up steam.
"We do expect at some point in 2010 for meat demand to rebuild as the economy grows," said Rich Nelson, analyst at the agriculture advisory firm Allendale Inc.
Feed and fuel costs are lower while chicken prices have risen, partly due to lower production by Pilgrim's and other companies. A tepid recovery in the economy, should put more people back in restaurants, Nelson said.
Pilgrim's Pride, which was the largest U.S. chicken producer when it filed for bankruptcy, will be a significant expansion for JBS, which has previously focused on beef, pork and lamb in the United States.
JBS expects the two companies will see significant cost savings from the deal, allowing them to streamline administrative costs, consolidate distribution networks, and benefit from shared purchasing arrangements.
A U.S. bankruptcy judge approved Pilgrim's Pride's reorganization plan on December 10.
Pilgrims' Pride current shares are being canceled and converted into new shares in 36 percent of the reorganized company. The company said in a U.S. Securities and Exchange Commission filing that it has the authority to issue 800 million shares of common stock and 50 million shares of preferred stock in the reorganized company.
Old Pilgrim's Pride shares were down 1 percent at $8.31 on the over-the-counter market. Shares of JBS, the world's largest beef processor, edged up 0.3 percent in afternoon trading in Brazil.
The case is: In re Pilgrim's Pride Corp, U.S. Bankruptcy Court, Northern District of Texas, No. 08-45664.
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