A Look at Sanderson Farms’ Risk Factors Amid Pending Takeover

Sanderson Farms (SAFM) is an American poultry products company headquartered in Mississippi. The company recently agreed to be acquired by Cargill and Continental Grain for $203 per share in a deal designed to take it private. Sanderson expects the transaction to be completed by the end of 2021 or early 2022.

Let’s take a look at Sanderson’s latest financial performance and risk factors amid the pending takeover.

Sanderson’s Fiscal Q3 Financial Results

For its Fiscal 2021 Q3 ended July 31, Sanderson reported revenue of $1.35 billion. That compared to revenue of $956.46 million in the same quarter last year and exceeded consensus estimates of $1.28 billion. EPS of $7.38 increased from $1.48 a year ago and beat consensus estimates of $6.37. The company attributed the strong fiscal Q3 results to significant improvements in the demand and prices of products sold to retailers and restaurants. (See Sanderson Farms stock charts on TipRanks).

Sanderson’s Risk Factors

The new TipRanks Risk Factors tool shows 29 risk factors for Sanderson. Since July 2021, the company has updated its risk profile to introduce five new risk factors related to its planned acquisition.

Sanderson tells investors that its planned takeover requires the approval of its shareholders and regulators and that there is no guarantee the deal will be completed. If the deal fails, Sanderson says it could be required to pay $158 million in termination fees. That could cause the company to use up cash that would have otherwise been invested into the business. Further, Sanderson cautions that failure to complete the merger could adversely impact its stock price.

Finance and Corporate is Sanderson’s main risk category, accounting for 31% of the total risks. Sanderson’s shares have gained about 47% since the beginning of 2021.

Analysts’ Take

Stephens analyst Ben Bienvenu recently reiterated a Hold rating on Sanderson stock. Consensus among analysts is a Hold based on 5 Holds.