The US poultry processor Pilgrim’s Pride has sent an open letter to shareholders of Gold Kist, the chicken processor which Pilgrim’s Pride is attempting to acquire, criticising the Gold Kist board and urging the shareholders to accept its offer.
Pilgrim’s Pride said it was disappointed at Gold Kist’s board’s recommendation to shareholders had failed to recognise both “the value our offer affords Gold Kist’s stockholders and the unique opportunity it presents to employees and contract growers”.
Pilgrim’s Pride’s offer to acquire all of the outstanding shares of Gold Kist at US$20 per share in cash expires at midnight, New York City Time, on 27 October, 2006, unless extended.
Gold Kist’s board rejected the offer, which values the Atlanta-based company at around US$1bn, last week. It maintained that the offer was not in the best interests of its shareholders and announced its intention to file a lawsuit against Pilgrim’s Pride.
In the highly critical letter, Pilgrim’s Pride does not pull its punches. It said the board is not managing the process in the best interests of shareholders and reminds shareholders that the offer represents a premium of 55% over Gold Kist’s closing stock price on 18 August, 2006, the last day of trading before Pilgrim’s Pride made its first approach to the Gold Kist board.
“While the Gold Kist board has expressed confidence in its strategic plan and the stand-alone value of the company, we note that prior to our offer, Gold Kist stock was trading at $12.93 per share. In light of ongoing industry volatility, our offer provides certain and immediate value of $20 per share in cash, which is not subject to both the risks inherent in the execution of Gold Kist’s long-term strategic plan or the many uncertainties of the poultry industry,” the letter reads.
“We are attempting to preserve your ability to elect a new board majority and negate a lawsuit which seeks to entrench Gold Kist management and delay your opportunity to receive cash for your shares. We believe Gold Kist is attempting to entrench its management and board and deny stockholders the opportunity to receive $20 in cash per share. Rather than negotiate a confidentiality agreement, furnish information requested more than six weeks ago, or attempt to negotiate a merger agreement, Gold Kist instead filed a lawsuit against Pilgrim’s Pride.”
The letter said that the lawsuit seeks to limit Gold Kist stockholders’ ability to vote in favour of Pilgrim’s Pride’s nominees. “We believe this is another attempt by Gold Kist’s board to entrench itself and delay your ability to receive cash for your shares. If the current Gold Kist directors continue to stand between you and our offer, we will vigorously defend against this lawsuit in order to preserve your right to elect a new board majority.”
In conclusion, Pilgrim’s Pride urges shareholders to act in their “own best interests”, and “send a clear message to the Gold Kist board by voicing your support for our offer and tendering your shares”.