Gold Kist Board Rejects Pilgrim Pride’s Offer As Inadequate

US - Gold Kist Inc. yesterday announced that its Board of Directors has rejected as inadequate Pilgrim’s Pride Corporation’s (NYSE:PPC) unsolicited tender offer to acquire all outstanding shares of common stock of Gold Kist at a price of $20.00 per share, and strongly recommends that its stockholders not tender their shares.
calendar icon 13 October 2006
clock icon 5 minute read

The basis for the Board’s unanimous decision is set forth in the attached letter to stockholders and Gold Kist’s Schedule 14D-9 filed today with the Securities and Exchange Commission.

After careful consideration, the Board of Directors reached its decision that the tender offer is not in the best interests of stockholders. The Board consulted with its financial and legal advisors and its Special Committee of independent directors. As previously stated, the Board and the Special Committee remain committed to the continuing enhancement and execution of the Company’s strategic business plan, as well as exploration of potential alternatives to maximize stockholder value.

“Our Board unanimously determined that the offer is inadequate and does not fully reflect the value of Gold Kist, including the Company’s strong market position and future growth prospects,” said John Bekkers, Gold Kist President and CEO. “We have successfully positioned ourselves to take advantage of attractive growth opportunities in key markets and are confident in our prospects.”

A.D. Frazier, Jr., Chairman of the Board of Directors and member of the Special Committee, said, “Following a detailed and disciplined process the Board concluded that Gold Kist and its stockholders are poised to begin benefiting from the significant investments made during the past few years under our current business plan. We are also in the process of actively exploring strategic alternatives, which may lead to valuations greater than the $20 per share offered by Pilgrim’s. Consequently, the Board, with advice from its financial advisors, believes that the offer is inconsistent with our goal of maximizing stockholder value. We can better serve our stockholders, customers and employees by continuing to execute our strategic business plan and by continuing to actively explore strategic alternatives.”

In arriving at its decision, the Board of Directors and the Special Committee considered numerous factors, including not but limited to the following:

• Pilgrim’s offer is inadequate, does not fully reflect the stand-alone value of Gold Kist, including its strong market position and its future growth prospects, and was made at a time when Gold Kist’s stock price was temporarily depressed following a recent cyclical downturn in the industry.

• The offer values Gold Kist at a price below recent trading levels.

• The Board of Directors believes the Company’s strategic plan will yield greater stockholder value than the offer and that the current management and Board structure of Gold Kist are built upon sound corporate governance principles. The Board also believes that current management and Board of Directors are uniquely situated to execute the Company’s long-term plan and deliver maximum value to Gold Kist stockholders.

• The Board is committed to continuing to explore alternatives to maximize stockholder value.

• The offer is subject to numerous conditions, which result in significant uncertainty that the offer will be consummated.

“The Board also believes that Pilgrim’s recognizes the attractiveness of Gold Kist’s current market positioning and post-2006 growth prospects and has opportunistically timed the offer to acquire Gold Kist before these factors are fully reflected in Gold Kist’s stock price,” said Bekkers.

The Board will continue to work with its financial advisors, Merrill Lynch & Co. and Gleacher Partners LLC, to explore potential alternatives to maximize stockholder value. The Board and management will continue to faithfully discharge their duties to its stockholders.

In addition, Gold Kist announced today that it has filed a lawsuit in federal court in the Northern District of Georgia seeking to enjoin Pilgrim’s from proceeding with its unlawful solicitation of Gold Kist stockholders to add its own officers to the Board of Directors of Gold Kist. The lawsuit alleges that Pilgrim’s attempt to add nine of its own officers to the Board of Directors of Gold Kist would, if successful, violate Section 8 of the Clayton Act, which prohibits officers and directors of companies of a certain size from sitting on the board of directors of a competitor. The lawsuit seeks to enjoin Pilgrim’s efforts to elect its nominees in violation of the Clayton Act. The lawsuit also alleges violations of the Securities and Exchange Commission’s proxy and tender offer rules by Pilgrim’s for failing to disclose to our stockholders that the election of the Pilgrim’s nominees would violate the Clayton Act. The complaint has been filed as an exhibit to the Company’s Schedule 14D-9.

The Gold Kist Board believes that it is critical that its stockholders receive full and fair disclosure about Pilgrim’s tender offer and believes that the election of its directors should be in compliance with the law. Gold Kist filed the lawsuit today to protect the rights of its stockholders to full and accurate disclosure regarding Pilgrim’s tender offer and to protect the integrity of the director election process.

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