Sanderson Farms Selling Out to Cargill and Continental Grain

Aug. 9, 2021
Combination with Wayne Farms could be scrutinized by federal regulators.

In what could be the first test of the Biden Administration's tougher stance against meat & poultry industry consolidation, Cargill Inc. and Continental Grain Co. – they don’t get much bigger than those two – today (Aug. 9) announced a deal to acquire Sanderson Farms Inc. and merge it with Continental's Wayne Farms poultry unit.

The transaction is worth about $4.53 billion. By our figuring, per the just completed 2021 Food Processing Top 100©, the merged firm should have sales of about $5.8 billion, which would put it close to the poultry sales of No. 1 Tyson and No. 2 Pilgrim's Pride. Sanderson Farms itself already was No. 3, although a ways back at $3.564 billion.

Combining Mississippi-based Sanderson with Georgia-based Wayne Farms would give it about 15% of U.S. chicken production, according to data from Watt Poultry USA cited in the Wall Street Journal. That's just a percentage point behind Pilgrim's and 5 points behind Tyson.

It comes at a time of rising chicken consumption – and prices. Sanderson recently reported a 34% jump in sales, to $1.134 billion, for its second quarter of fiscal 2021 and net income of $97 million, or $4.34 per share, compared to net of $6.1 million for the second quarter of fiscal 2020.

The resulting firm will use the Sanderson name, but the CEO will be Wayne Farms CEO Clint Rivers. It apparently will be jointly owned by the two agribusiness giants.

Cargill and Continental Grain will pay $203 per share in cash for publicly held Sanderson Farms, whose board has already approved the deal; Sanderson shareholders will have to do likewise. Joe Sanderson is third-generation chairman and CEO. The purchase price represents a 30.3% premium to Sanderson Farms' share price of $155.74 on June 18, before media speculation about a potential sale began.

Paul Fribourg, chairman and CEO of Continental Grain, noted Continental and Cargill "had a decades-long relationship between two family-owned companies."

Operations will include poultry processing plants and prepared foods plants across Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina and Texas – 23 plants by our count.

It may not be a done deal. President Joe Biden signed a presidential executive order July 9 meant to weaken monopolies and promote competition in the U.S., with half a billion dollars aimed at combatting consolidation in the meat & poultry category. "Dominant companies can use their power to engage in abusive practices and make it harder for farmers, ranchers and consumers to get a fair price," a subsequent USDA announcement said.

That executive order follows a spate of legal activity recently against big processors in the meat & poultry sector, resulting in criminal and civil prosecutions for price-fixing and antitrust activities. Search "price fixing" on and you'll see 10 different but recent stories just on the first page of results.

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