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Pilgrims Pride Corp PPC

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Pilgrim’s Pride Expands Its Prepared Food Offering With Kerry Acquisition; Shares Compelling

Analyst Note

| Rebecca Scheuneman, CFA |

No-moat Pilgrim’s Pride announced the $952 million acquisition of wide-moat Kerry Group’s consumer foods meats and meals business, consisting of value-added meats and prepared meals sold primarily in U.K and Ireland grocery stores. As Kerry’s moat stems from its taste and nutrition segment, not its consumer foods division, we don’t expect the transaction to alter Pilgrim’s competitive standing. Even so, we view the deal favorably, as it takes Pilgrim’s mix of non-commoditized fare to over 25% of sales from 17% previously, products that exhibit more stable and higher profit margins (10% three-year EBITDA margins for the acquired business versus 7.5% for Pilgrim’s). While the target has not experienced sales growth in aggregate in recent years, its lineup of plant-based meats and its direct-to-consumer home delivered meals segment have realized compelling growth, and provide a platform for Pilgrim’s to expand to other geographies, if it opts to do so.

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Company Profile

Business Description

Pilgrim's Pride is the second- largest poultry producer in the U.S. (62% of 2020 sales), Europe (27%), and Mexico (11%). The 2019 purchase of Tulip, the U.K.'s largest hog producer, marks the firm's entrance into the pork market, which represented 11% of 2020 sales. Pilgrim's sells its protein to chain restaurants, food processors, and retail chains under brand names Pilgrim's, Country Pride, Gold'n Plump, and Just Bare. Channel exposure is split evenly between retail and food service, with the majority of food-service revenue coming from quick-service restaurants. JBS owns 80% of Pilgrim's outstanding shares.

Contact
1770 Promontory Circle
Greeley, CO, 80634-9038
T +1 970 506-8000
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Mar 31, 2021
Fiscal Year End Dec 26, 2021
Stock Type Slow Growth
Employees 54,900

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