Shares of Sanderson Farms (SAFM) are under pressure on Wednesday after the White House blamed rising meat prices on a lack of competition in processing. "The President understands that families have been facing higher prices at the grocery store recently. Half of those recent increases are from meat prices-specifically, beef, pork, and poultry. While factors like increased consumer demand have played a role, the price increases are also driven by a lack of competition at a key bottleneck point in the meat supply chain: meat-processing," the White House said in a blog post.

LACK OF PROCESSING COMPETITION: The White House said in a blog post, "The President understands that families have been facing higher prices at the grocery store recently. Half of those recent increases are from meat prices-specifically, beef, pork, and poultry. While factors like increased consumer demand have played a role, the price increases are also driven by a lack of competition at a key bottleneck point in the meat supply chain: meat-processing. Just four large conglomerates control the majority of the market for each of these three products, and the data show that these companies have been raising prices while generating record profits during the pandemic. That's why the Biden-Harris Administration is taking bold action to enforce the antitrust laws, boost competition in meat-processing, and push back on pandemic profiteering that is hurting consumers, farmers, and ranchers across the country." The White House noted that JBS (JBSAY) provided $2.3B in dividends and share buybacks in 2020 while Tyson Foods (TSN) recently raised dividends by 6% for fiscal year 2021.

WHAT'S NOTABLE: It was previously disclosed in a regulatory filing that on August 12, 2021, JBS Brazil delivered to the board of directors of Pilgrim's Pride (PPC) a letter setting forth a proposal to acquire all of the outstanding shares of common stock that are not owned by JBS Brazil or its subsidiaries for a purchase price of $26.50 per share in cash. "JBS Brazil indicated in the proposal that it expects that a fully empowered special committee of independent and disinterested directors appointed by [Pilgrim's] Board will consider the proposal and make a recommendation to the company's Board. JBS Brazil also stated in the proposal that it will not move forward with the transaction contemplated by the proposal unless the proposed transaction is approved by the Special Committee, advised by independent legal and financial advisors, and that the proposed transaction will be subject to a non-waivable condition requiring the approval of a majority of the aggregate voting power represented by the shares of common stock that are not owned by JBS Brazil or its affiliates," the filing stated.

On August 9, Cargill, Continental Grain Company, and Sanderson Farms announced they have reached a definitive agreement for a joint venture between Cargill and Continental Grain to acquire Sanderson Farms for $203 per share in cash, representing a total equity value for Sanderson Farms of $4.53B. The purchase price represents a 30.3% premium to Sanderson Farms' unaffected share price of $155.74 on June 18, 2021, the last full trading day prior to media speculation about the potential sale of Sanderson Farms; a 22.8% premium to the Sanderson Farms 30-day volume weighted average price as of June 18, 2021, and a 15.2% premium to the all-time high share price as of June 18, 2021.

Upon completion of the transaction, Cargill and Continental Grain will combine Sanderson Farms with Wayne Farms, a subsidiary of Continental Grain, to form a new, privately held poultry business. The new company will have state-of-the-art operations and will continue to invest in its workforce and in employee safety. Operations will include poultry processing plants and prepared foods plants across Alabama, Arkansas, Georgia, Louisiana, Mississippi, North Carolina, and Texas. The transaction is expected to close by the end of 2021 or early 2022, and will be subject to regulatory and Sanderson Farms stockholder approval, and other customary closing conditions. The acquisition consortium has committed equity and debt financing in place to complete the transaction. Wayne Farms CEO Clint Rivers will lead the combined company. Upon the completion of the transaction, Sanderson Farms will become a private company, and its shares will no longer be traded on NASDAQ.

PRICE ACTION: In Wednesday afternoon trading, shares of Sanderson Farms have dropped about 1.5% to $191.80, while Tyson's stock has slipped almost 1% to $76.68. Shares of Pilgrim's Pride are also fractionally down at $27.82.