Tyson Rival Pilgrim's Pride Could Come Back Stronger Than Ever

Last Updated Sep 16, 2009 1:01 PM EDT

The rumors were true -- Brazil-based JBS is buying a 64 percent stake in bankrupt poultry company Pilgrim's Pride for $800 million.

JBS is the biggest producer of beef in the world, and with that company's backing, Pilgrim's Pride says it expects to pay off its creditors and exit bankruptcy by the end of the year. It filed for Chapter 11 last December.

Dan Mitchell at Daily Bread speculated at the time that rival Tyson Foods may have played a part in Pilgrim's Pride's downfall. Even as chicken prices fell thanks to oversupply, Tyson declined to slow production, with CEO Richard Bond insisting, "we still believe that the demand-supply balance for us is still reasonably good." As Mitchell pointed out, Tyson could continue making profits from other meats, whereas Pilgrim's Pride is concentrated on chicken.

But if this deal goes through, a JBS-backed Pilgrim's Pride could wind up being an even bigger threat to Tyson.

That is, if antitrust authorities don't get in the way. Agribusiness has become a priority for them lately -- though JBS is a beef and pork company, with little to no presence in the chicken industry.

JBS is also merging with a former rival in Brazil, Bertin SA. JBS has been on an acquisitions rampage lately; it purchased Smithfield Beef last year and Swift & Company the year before, plus it was after National Beef Packing until antitrust concerns thwarted its plans.

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  • Katherine Glover