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November 29, 2016

Pilgrim’s Pride swoops for US poultry peer GNP

Pilgrim's Pride has struck a deal to buy fellow US poultry processor GNP for US$350m.

By Dean Best

Pilgrim’s Pride has struck a deal to buy fellow US poultry processor GNP for US$350m.

The all-cash transaction is expected to close in the first quarter of next year, subject to conditions including regulatory approval, Pilgrim’s Pride said.

Pilgrim’s Pride, in which Brazilian meat JBS owns a majority stake, said GNP “complements” its business “both in geography and differentiated branded products”. GNP supplies poultry products in the Upper Midwest of the US. Its range includes the Just Bare organic brand, as well as products that have qualified for the No Antibiotics–Ever label and the American Humane Certified seal. The deal, Pilgrim’s Pride said, gives it an opportunity “to immediately strengthen the company’s position in fast-growing and higher-margin branded retail product categories, such as natural and organic.”

Bill Lovette, the CEO of Pilgrim’s Pride, added: “GNP Company boasts outstanding state-of-the-art assets in geographic areas where Pilgrim’s is not currently present, providing Pilgrim’s the opportunity to expand our production and customer bases, while maintaining our high standards for quality service and great-tasting products. Today’s announcement is a clear demonstration of Pilgrim’s commitment to our growth strategy of disciplined acquisitions that enhance both our portfolio of value-added products and our ability to provide key customers with the high-quality products demanded by consumers.”

The $350m price tag reflects an expected EBITDA multiple of 5.2x, excluding any potential synergy gains, Pilgrim’s Pride said. It expects to achieve around $20m in annualised synergies, “primarily from the optimisation of production and distribution, and cost savings in purchasing, production, logistics and SG&A”. Combine that with what Pilgrim’s Pride forecast would be around $28 million in tax savings and the company said the deal would equate to an EBITDA multiple of 3.9x.

Pilgrim’s Pride expects the acquisition to be “accretive” to the company’s diluted earnings per share in 2017.

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