PILGRIM'S Pride Corp. announced Nov. 29 a definitive agreement to acquire GNP Co. — a leading provider of chicken products in the Upper Midwest — from The Maschhoffs in an all-cash, $350 million transaction.
The proposal has the unanimous support of the Pilgrim's board of directors as well as the support of JBS S.A., the majority owner of Pilgrim's.
It is anticipated that the proposed transaction will close during the first quarter of 2017, subject to regulatory review and approval and customary closing conditions. The Maschhoffs had purchased GNP in November 2013 for an undisclosed amount.
"The Pilgrim's team is excited to combine the collective strengths of Pilgrim's Pride and GNP Co.," Bill Lovette, Pilgrim's chief executive officer, said. "GNP Co. 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."
Pilgrim's said GNP's operational competencies and use of innovative technologies, including gas stunning, aeroscalding and automated deboning, will enable the company to significantly increase the rate of adoption of new technologies in existing facilities, enhancing the company's production efficiencies and operational excellence.
The addition of GNP's portfolio of Just BARE certified organic and natural/American Humane Certified/no-antibiotics-ever (NAE) product lines to Pilgrim's existing NAE and organic production capabilities will further position Pilgrim's as a leading provider of high-quality products in the fastest-growing chicken segments.
The $350 million enterprise value of the transaction reflects an expected earnings before interest, taxes, depreciation and amortization (EBITDA) multiple of 5.2x, excluding any potential synergy gains. The acquisition complements Pilgrim's existing business both in geography and differentiated branded products, presenting an opportunity to immediately strengthen the company's position in fast-growing and higher-margin branded retail product categories, such as natural and organic.
"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," Lovette said. "We look forward to welcoming GNP Co.'s team members and family farmer partners to the Pilgrim's team as we continue to position Pilgrim's as the preferred choice of consumers and retail and foodservice partners across the country."
Pilgrim's expects to achieve approximately $20 million in annualized synergies, primarily from the optimization of production and distribution and cost savings in purchasing, production, logistics and selling, general and administrative expenses. In addition to operational synergies, the company anticipates capturing an estimated present value of approximately $28 million in tax savings and a post-synergy EBITDA multiple of 3.9x.
Pilgrim's expects the acquisition to be accretive to the company's diluted earnings per share in 2017 and believes that the combined company will have a strong financial position, improved capital structure and substantial cash flow generation capability.