By DEE-ANN DURBIN and MICHELLE CHAPMAN
AP Business Writers
With the price of chicken soaring, the third-largest poultry producer in the U.S. is being bought for $4.53 billion.
Cargill and Continental Grain have formed a joint venture to acquire Sanderson Farms, paying $203 per share in cash for a company that last year processed more than 4.8 billion pounds of meat.
The companies plan to combine Sanderson Farms with Wayne Farms, a Continental Grain subsidiary, to form a new, privately held poultry business. Operations will include poultry processing plants and prepared foods plants across Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, and Texas.
Wayne Farms has more than 9,000 employees. It makes products under brand names including Wayne Farms fresh and prepared chicken; Platinum Harvest premium fresh chicken; Chef’s Craft gourmet chicken; Naked Truth premium chicken and Ladybirdy premium chicken.
Laurel, Mississippi-based Sanderson Farms has 17,000 employees and 12 plants. It processes 13.6 million chickens per week.
The deal comes as chicken prices are surging. Wholesale chicken breast prices have been at or above $1.80 per pound since mid-April, a seven-year high, according to the Livestock Marketing Information Center. Last year at this time, they were $1.13 per pound.
Pandemic-related plant shutdowns last year and winter storms across the South earlier this year have impacted supplies.
The price increases have been compounded by demand from major restaurant chains. McDonald’s Corp., Popeyes Louisiana Kitchen Inc., Wendy’s Co. and Burger King have all recently introduced new variations of chicken sandwiches. McDonald’s cited chicken sandwiches, as well as a chicken McNugget meal promotion with the boy band BTS, for its better-than-expected second quarter sales.
Wholesale chicken wing prices have been above $3 per pound since April, well above the five-year average of $1.75 per pound. Some dine-in chains like Applebee’s and Chilis, which were forced to close dining rooms during the pandemic, have launched delivery-only chicken wing brands.
In conference call with investors last week, WingStop, the chicken wing chain, said the price for wings on the spot market are up 125%, and it expects more of the same for the rest of the year.
Sales at Sanderson Farms soared more than 34% during the second quarter compared with the same three-month period last year.
“Expanding our poultry offerings to the U.S. is a key enabler of our ability to meet customer and consumer demands,” Cargill Chairman and CEO David MacLennan said in a prepared statement Monday.
Both Cargill, which is based outside of Minneapolis, Minnesota, and Continental Grain Co., which is based in New York, are private companies.
Cargill is one of the world’s largest food companies, with more than 155,000 employees in 70 countries. It produces meat and animal feed and makes agricultural commodities like vegetable oil, among other businesses. Continental Grain invests in food companies and operates food production companies in Latin America, Asia and elsewhere.
Wayne Farms CEO Clint Rivers will lead the combined company.
The U.S. poultry industry has been operating under a cloud in recent years. Restaurant chains, food producers and grocers, including Walmart, Kroger and Chick-fil-A, sued Sanderson Farms, Wayne Farms and other poultry producers in 2016 alleging that the companies conspired to fix poultry prices over an eight-year period.
The U.S. Department of Justice intervened in the case and has charged at least 10 people with antitrust violations, including current and former employees at Pilgrim’s Pride, Claxton Poultry Farms, Perdue Farms and Koch Foods. Sanderson Farms and Wayne Farms have not been charged. Sanderson received a subpoena in the case in 2019 and has said it is cooperating.
Sanderson Farms will become a private company and its shares will no longer be traded on Nasdaq. Its shares jumped 7.5% to $196.01 in afternoon trading.
The deal is expected to close by the end of this year or early next year. It still needs approval from Sanderson Farms stockholders.
This story was first published on August 9, 2021. It was updated on August 18, 2021 to remove an incorrectly attached photo that showed laying hens instead of broilers.