JBS US holds the majority of Pilgrim’s Pride
In the last part of this series, we learned that Pilgrim uses JBS USA’s sales network. This is because JBS USA owns a 75.5% share of Pilgrim’s business. JBS, a Brazilian meat processor, purchased the majority stake of Pilgrim’s Pride in 2009. The company moved its headquarters to Greely, Colorado following this move. So, why did the company file bankruptcy back then?
Debt plus feed cost burdened Pilgrim’s
The primary reason why Pilgrim’s Pride filed for Chapter 11 bankruptcy was the burden of total debts in the amount of $1.9 billion. Some Wall Street analysts suggest that this debt burden was due to the company’s acquisition of the Gold List for $1.3 billion.
Pilgrim’s Pride also reported a one-time goodwill impairment charge of $501.4 million related to this acquisition in the fourth quarter of FY 2008.
Tyson Foods (TSN) had a debt of $2.8 billion, Sanderson Farms (SAFM) had a debt of $0.23 billion, and Hillshire Brands (HSH) had a total debt of $3.1 billion in 2008. Investors may want to consider a diversified portfolio ETF, such as the Consumer Staples Select Sector SPDR Fund (XLP), which also holds Tyson Foods (TSN) and Walmart (WMT).
The company’s cost of operations shot up higher than revenues, leading to an operating loss in the amount of $1.1 billion. Higher corn and soybean feed prices coupled with moderated chicken prices led to the company taking a loss. Read part eight of this series to learn more about this particular risk.
Pilgrim’s Pride stated that it would focus on restructuring the company. At the end of FY 2013, it had shut 14 distribution centers, sold or idled 11 plants, consolidated production facilities, and reduced administrative and corporate expenses.
The company is now back to good health and announced two acquisition proposals, which we’ll discuss next.