By Lynda Kiernan
Pilgrim’s Pride announced it has agreed to acquire UK pork producer and integrated prepared food supplier, Tulip Limited, from Danish Crown for US$354 million.
Tulip controls 12 fresh and value-added operations across the UK, and is the largest pig producer in the country, with annual sales of approximately £1 billion (US$1.1 billion). Once completed, the all-cash deal will create a leading European food company and one of the largest integrated prepared food businesses in the UK.
“We are pleased to strengthen our European foods platform with the acquisition of Tulip Limited, which positions Pilgrim’s as a leading global prepared foods player,” said Jayson Penn, global CEO, Pilgrim’s Pride. “The transaction represents the logical next step in our evolution to expand our geographical footprint, enhance our value-added portfolio and reduce volatility across our business with a more stable margin profile.”
“Tulip Limited’s integrated production platform, consumer ready innovation capabilities, well-invested assets, established customer relationships and strong leadership team will solidify Pilgrim’s platform for growth in the attractive UK market.”
JBS-owned Pilgrim’s Pride already holds a leading position in the UK chicken market, and is the second largest chicken producer in Mexico. In addition, in 2016, the company agreed to acquire Minnesota-based GNP Co., the largest chicken producer in the U.S. Midwest, and maker of Gold N’ Plump and Just Bare chicken brands, for $350 million in cash.
The acquisition expanded Pilgrim’s geographic reach through GNP’s distribution networks across all 50 U.S. states, and provided Pilgrim’s access to GNP’s innovative technologies including gas stunning, aeroscalding, and automated deboning abilities.
“The addition of the GNP Company’s portfolio of Just BARE® Certified Organic and Natural/American Humane CertifiedTM/No-Antibiotics-Ever (NAE) product lines to Pilgrim’s existing NAE and organic production capabilities, further positions Pilgrim’s as a leading provider of high quality products in the fastest growing chicken segments,” said Pilgrim’s Pride in a company statement at the time.
As part of the deal terms for Tulip, Danish Crown, which had previously criticized Tulip’s performance, and has said it was selling the company at a loss, will continue to supply pork to Tulip under a long-term supply agreement existing between the two companies.
“For four years Tulip Limited has cost us owners money instead of contributing to our earnings,” said Erik Bredholt, chair of the board of directors, Danish Crown. And Danish Crown stated, “This sale price is below Danish Crown’s book values in Tulip Limited, so Danish Crown will realize a loss of approximately DKK 500 million (US$74 million) as a result of the sale.”
“On our part, we want to simplify our UK business. Going forward we will supply Danish pork to Pilgrim’s, so all in all the transaction holds out interesting perspectives for both parties,” said Jais Valeur, group CEO, Danish Crown.
Moving forward, under Pilgrim’s Pride, Tulip will continue to be led by CEO, Andrew Cracknell and his management team.
“Pilgrim’s is acquiring an industry-leading farming operation, a strong team of dedicated people and a network of well-invested manufacturing sites,” said Cracknell. “Our companies share a rich heritage in agriculture and food production with aligned values that put people and customers at the heart of all we do. The Tulip Limited leadership team and I look forward to working with our new colleagues to build upon the fantastic progress made within the business and realise our combined growth opportunities as we enter an exciting new phase.”
This diversification by Pilgrim’s Pride (already a poultry giant) into EU pork production could mitigate the fallout from the June signing of a provisional trade agreement between the EU and the Mercosur bloc of South American countries, Argentina, Brazil, Paraguay, and Uruguay.
After more than 20 years of negotiations, the agreement is designed to remove trade tariffs for 800 million consumers, the largest collective population in the world, and as part of the agreement, the EU has agreed to accept 180,000 tons of additional poultry imports – double the amount offered at the end of 2017.
Meanwhile, the effects on the EU pork industry will be relatively small, with a maximum of 25,000 tons of pork and pig meat allowed to be imported under the deal, as long as it is free of ractopamine.
In 2018, the EU imported 33,000 tons of pork combined from all global sellers, however, exports totaled 3.8 million tons, including 20,000 tons to Mercosur member countries. Once the trade deal is finalized, these exports will be tariff free for the EU.
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