Chicken producer Sanderson Farms agrees to $4.5 billion buyout deal

Chicken producer Sanderson Farms Inc agreed on Monday to be bought for $4.53 billion by commodities trader Cargill Inc and investment firm Continental Grain Co at a time when meat prices have been soaring due to strong demand.

The combination with Continental's Wayne Farms will allow Sanderson Farms, the third-largest poultry producer in the United States, to strengthen its position and help it better compete with rivals Tyson Foods and Pilgrim's Pride Corp.

Wayne Farms Chief Executive Officer Clint Rivers will lead the combined business.

Demand for chicken wings and other chicken products have been rising in recent months as restaurants reopened in the United States, boosting sales at Sanderson Farms and rival Tyson Foods Inc.

Cargill and Continental Grain offered $203 per Sanderson Farms share, representing a premium of about 11% to the stock's closing price on Friday.

A Reuters report in June had said Sanderson Farms had drawn interest from buyers including agricultural investment firm Continental.

Several fast-food chains, including Yum Brands Inc's KFC and Restaurant Brands International Inc's Burger King, have launched chicken sandwiches, while Wingstop Inc has been doubling down on chicken thighs to meet rising demand.

Prices of chicken products, especially those of wings and breasts, have risen as easing pandemic-related restrictions bring consumers back to restaurants and more fast-food chains create fried-chicken sandwiches.

Sanderson Farms shares closed at $182.37 on Friday, gaining 40% so far this year, and giving the company a market value of $4.07 billion. The stock has risen 17% since reports emerged about Sanderson Farms exploring a sale.

J.P. Morgan analysts said in June a deal between Continental Grain and Sanderson Farms would draw some government attention, given recent lawsuits regarding chicken price fixing and as a combined entity would control 15% of the country's chicken market.