Pilgrim's Pride' stock offering raises concern
Pilgrim's Pride Corporation recently announced that it
has priced a public offering of 7,500,000 shares of common stock at US$24 per
The offering, made through Lehman Brothers Inc. as sole underwriter, is
expected to close on 16 May, 2008, subject to standard closing conditions. The
company will use the net proceeds of the offering to reduce outstanding
indebtedness under its credit facilities and for general corporate
Meatingplace, however, reports that this move has raised concerns for Wall
Street analysts about the company's debt load and its ability to cash in on
rising poultry prices.
"We are surprised that the company is choosing to issue equity at the
bottom of the commodity cycle, particularly given that the company had
negotiated more liberal terms in its credit agreements," Stephens Inc. analyst
Farha Aslam reportedly wrote in a note to investors.
While seeing the move as neutral to earnings, JPMorgan analyst Pablo Zuanic
wrote in a note to investors, "We remain concerned that PPC faces
company-specific issues that may not allow it to benefit from better chicken
economics in the next six months."
Aslma said that while the equity offering erases some of the upside in the
stock, "We believe our $30 price target is still very achievable."
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