Pilgrim’s Pride agreed last week to acquire Minnesota-based chicken products provider GNP Company for $350 million, which the poultry company said would allow it to target consumers of organic and humanely-raised chicken while expanding into the upper Midwest.
The Colorado-based, publicly-traded company said in a statement that the valuation of the deal represents a 5.2x EBITDA multiple, which it expects will achieve annual synergies of $20 million per year.
Executives highlighted the opportunity to expand the reach of its production and consumer presence into the upper Midwest, expanding on the regions it already operates in, including 12 US states, Mexico and Puerto Rico.
The acquisition is also part of an effort to expand capabilities in fast-growing markets for organic and humanely-raised chicken, the company added, highlighting GNP’s use of technology and its Just BARE organic chicken brand’s certifications for organic, antibiotic-free and humane practices.
“GNP Company’s operational competencies and use of innovative technologies, including gas stunning, aeroscalding, and automated deboning will allow Pilgrim’s to significantly increase the rate of adoption of new technologies in existing facilities,” according to the statement.
The company noted that Just BARE had been certified by the American Humane Association, an organisation that provides independent verification of compliance with proprietary standards on the care and handling of farm animals.
Despite this, a prominent advocacy group rebuked the validity of the American Humane certification. In an interview with Agri Investor, Matthew Prescott, senior food policy director at the unaffiliated animal protection organisation, Humane Society, said the American Humane certification still allows for what some in the animal welfare community consider to be the most egregious abuses of chickens in poultry production.
Prescott pointed to findings from Consumer Reports showing that the American Humane Association certifications fail to address concerns including the rate at which birds are grown, how they are packed into facilities, their lack of ability to engage in natural behaviours and inhumane slaughter methods.
“Both GNP and Pilgrim’s Pride are using inhumane practices that are misaligned with what major chicken buyers like Compass Group and Aramark are now requiring,” he said. “Study after study shows that consumers care so much about this issue that for a company to fail to address animal welfare issues appropriately could put both that company and its investors at risk.”
Humane certifications are an increasingly important factor for shoppers, according to the Food Marketing Institute, which reported last year that animal welfare ranked second among social consideration taken into account by consumers in grocery stores. Perdue is among those making animal welfare policies a more prominent part of their marketing efforts.
Last month, food vendors Compass Group and Aramark also announced they would ask their suppliers to commit to ensuring all of that the broiler chickens they provide are raised under humane conditions by 2024.
The Pilgrim’s Pride deal is pending regulatory approval and expected to be completed during the first quarter of 2017.
Both Pilgrim’s Pride and GNP declined to comment further for this story.