November 29, 2016 / 11:02 PM / 2 years ago

UPDATE 1-Pilgrim's Pride to acquire organic chicken line in $350 mln deal

(Adds sales data, Maschhoff comment, closing stock price)

By Tom Polansek

CHICAGO, Nov 29 (Reuters) - Pilgrim’s Pride Corp, the world’s second-largest chicken producer, will buy smaller rival GNP Company in a $350 million deal that will increase its organic and antibiotic-free product offerings, the companies said on Tuesday.

The all-cash deal helps Pilgrim’s, which is mostly owned by meatpacker JBS SA, keep up with a consumer shift toward products perceived to be more natural and healthy.

To take advantage of the trend, meat companies and restaurants are increasingly seeking to sell poultry raised on organic grain and without antibiotics. The change also addresses consumer concerns about health risks from eating meat raised with certain antibiotics.

Pilgrim’s shares ended up 1.7 percent, broadly in line with other meat producers such as Tyson Foods Inc.

The sale comes after GNP, owned by privately held Maschhoff Family Foods, said in February that it planned to remove all antibiotics from chickens sold under its Gold’n Plump brand by 2019. The company already sells organic chicken and chicken raised without antibiotics under its Just Bare brand.

In a statement, Pilgrim’s said the acquisition gives it “an opportunity to immediately strengthen the company’s position in fast-growing and higher-margin branded retail product categories, such as natural and organic.”

A Pilgrim’s representative could not be reached. The company’s statement said the deal will also help it to expand in the upper U.S. Midwest.

Public health experts and federal regulators have long been concerned that routine feeding of certain antibiotics to animals could lead to antibiotic-resistant superbugs, a health hazard for humans. Finding protein raised in the United States without such drugs has been a challenge for food companies.

Tyson, the nation’s largest chicken company, intends to remove antibiotics important to human medicine from its flocks by September 2017. It also has put a stronger focus on selling higher-margin products.

GNP ranks 19 among U.S. producers of broiler chickens, slaughtering 1.9 million birds a week for meat, according to Watt PoultryUSA, which tracks companies in the sector. It said GNP’s 2015 sales were $443.4 million.

A GNP spokeswoman declined to comment on sales or the transaction.

Maschhoff acquired the company three years ago for an undisclosed amount, in a departure from its business as the biggest family-owned U.S. pork company.

A Maschhoff spokesman said the company’s owners want to focus on their hog business again.

Jason Logsdon, the Maschhoff chief executive who oversaw the acquisition, left the company last year.

Editing by Matthew Lewis and Dan Grebler

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