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Shares of Sanderson Farms closed at $166.58 on Monday, up 6.96% on the talk of a potential deal. In extended trading, the stock climbed more than 9%, boosting its market cap to more than $3.72 billion. Any buyer would need to pay a premium to that price.
Citing people familiar with the matter, the paper said Sanderson hired Centerview Partners for advice after attracting the interest of potential buyers, including agricultural investment firm Continental Grain. The Journal said the discussions between the parties may not result in a sale.
A combination of strong demand and labor shortages has pushed poultry prices higher, and further increases could still be ahead. Chicken wing prices, for example, were $2.72 per pound on average last week, according to the U.S. Department of Agriculture, which is nearly 20 cents higher than the same week last year.
Sanderson is the third-largest food processor in the U.S. in a field dominated by Tyson Foods.
According to the report, a deal with Continental would create a company producing about 15% of the country’s chicken. That would put the newly formed company only slightly behind Pilgrim’s Pride, which has a 16% share of the market, the report said.
Continental owns Wayne Farms, a small chicken processor, and had once hoped to go public and act as a consolidator in the industry.
When reached by CNBC, Sanderson declined to comment.