Pilgrim's Pride (PPC 29.10) operates chicken food processing plants and prepared food facilities in 14 states, Puerto Rico, and Mexico. Soon, though, it will be operating 13 additional processing and manufacturing units in Northern Ireland, UK, France, the Netherlands, and Ireland following its acquisition of Northern Ireland-based Moy Park.
That acquisition was announced this morning and it values the equity interest of Moy Park at approximately $1.0 billion, implying an enterprise value of approximately $1.3 billion.
Pilgrim's Pride will fund the purchase with a combination of cash on hand, existing credit facilities, and a Subordinated Seller Financing Note, which it intends to replace with the issuance of permanent financing.
The benefits of the Moy Park acquisition, Pilgrim's Pride said, include increased global diversification, an expanded portfolio of prepared foods, and an improved and more stable margin profile on the chicken business.
Moy Park, which is one of the UK's top 10 food companies and will remain headquartered in Northern Ireland, will deliver incremental annual revenue of approximately $2.0 billion and provide Pilgrim's Pride with access to the UK and European markets. In 2016, Pilgrim's Pride reported revenues of $7.93 billion.
It is Pilgrim's Pride belief that it can achieve approximately $50 million in annualized synergies over the next two years and that the deal will be immediately accretive to earnings per share.
That's a positive characterization, which befits a stock that has had a distinctly positive bias this year. Entering today's trade, PPC, which trades at roughly 12x estimated FY17 earnings, is up 53.2% in 2017.