<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 8, 1997
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------------
SCHEDULE 13E-3
RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
GOLDEN POULTRY COMPANY, INC.
----------------------------
(Name of Issuer)
GOLDEN POULTRY COMPANY, INC.
GOLD KIST INC.
GOLDEN POULTRY ACQUISITION CORP.
--------------------------------
(Name of Person(s) Filing Statement)
COMMON STOCK, NO PAR VALUE PER SHARE
------------------------------------
(Title of Class of Securities)
331151109
---------
(CUSIP Number of Class of Securities)
<TABLE>
<S> <C> <C>
JACK L. LAWING JACK L. LAWING JACK L. LAWING
GOLDEN POULTRY COMPANY, INC. GOLD KIST, INC. GOLDEN POULTRY ACQUISITION CORP.
244 PERIMETER CENTER PARKWAY, N.E. 244 PERIMETER CENTER PARKWAY, N.E. 244 PERIMETER CENTER PARKWAY, N.E.
ATLANTA, GEORGIA 30346 ATLANTA, GEORGIA 30346 ATLANTA, GEORGIA 30346
(770) 393-5000 (770) 393-5000 (770) 393-5000
</TABLE>
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSONS AUTHORIZED TO RECEIVE NOTICES AND
COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
B. HARVEY HILL, JR., ESQ. GEORGE L. COHEN, ESQ.
SUSAN J. WILSON, ESQ. THOMAS C. HERMAN, ESQ.
ALSTON & BIRD LLP SUTHERLAND, ASBILL & BRENNAN, L.L.P.
ONE ATLANTIC CENTER 999 PEACHTREE STREET
1201 WEST PEACHTREE STREET ATLANTA, GEORGIA 30309
ATLANTA, GEORGIA 30309-3424 (404) 853-8000
(404) 881-7000
MAY 8, 1997
- -------------------------------------------------------------------------------
(Date Proxy Statement First Published, Sent or Given to Security Holders)
This statement is filed in connection with (check the appropriate box):
a. [X] The filing of solicitation materials or an information statement subject
to Regulation 14A, Regulation 14C, or Rule 13e-3(c) under the Securities
Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act of 1933.
c. [ ] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies. [X]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- ------------------------------------------------------------------------------
<S> <C>
$55,196,420.25 $11,040
==============================================================================
</TABLE>
<PAGE>
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form or
schedule and the date of its filing.
<TABLE>
<S> <C>
Amount previously paid: $11,040 Filing party: Golden Poultry Company, Inc.
Form or Registration no.: Schedule 14A Date filed: May 8, 1997
</TABLE>
*For purposes of calculation of the filing fee only. This transaction relates
to the proposed merger (the "Merger") of an indirect wholly owned subsidiary of
Gold Kist Inc. ("Gold Kist") with and into Golden Poultry Company, Inc. (the
"Company"). The "Transaction Valuation" amount referenced above is based upon
the purchase of 3,873,433 shares of Common Stock, no par value per share (the
"Common Stock"), of the Company at $14.25, the cash price per share of Common
Stock to be paid in the Merger. In accordance with Rule 0-11(c)(1) under the
Securities Exchange Act of 1934, the filing fee is determined by multiplying the
amount calculated pursuant to the preceding sentence by 1/50th of one percent.
This Rule 13E-3 Transaction Statement (the "Statement") of Golden
Poultry Company, Inc., a Georgia corporation (the "Company"), Gold Kist Inc., a
Georgia corporation ("Gold Kist"), and Golden Poultry Acquisition Corporation, a
Georgia corporation and indirect wholly owned subsidiary of Gold Kist ("Merger
Sub"), relates to an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of April 22, 1997, among the Company, Gold Kist, Merger Sub and Agri
International, Inc., a wholly owned subsidiary of Gold Kist and Merger Sub's
direct corporate parent ("Agri"), pursuant to which, among other things, (a)
Merger Sub will be merged with and into the Company (the "Merger" or the
"Transaction"), with the Company being the surviving corporation (the "Surviving
Corporation"), (b) each outstanding share of Common Stock (except those shares
of Common Stock held by the Company as treasury stock, owned by Gold Kist or its
affiliates or held by persons who perfect their dissenters' rights under Georgia
law) will be converted into the right to receive $14.25 without interest, (c)
each outstanding share of Common Stock held by Gold Kist or its affiliates will
be canceled without consideration and (d) each outstanding share of Merger Sub
common stock will be converted into one share of common stock of the Surviving
Corporation. The Merger Agreement and the Merger have already been approved by
the board of directors of each of the parties to the Merger Agreement and are
subject to the approval of the shareholders of the Company at a Special Meeting
of Shareholders to be held on ________, 1997. This Statement is intended to
satisfy the reporting requirements of Section 13(e) of the Securities Exchange
Act of 1933, as amended (the "Act"). A copy of the Merger Agreement is filed by
the Company as Exhibit A to the Company's Proxy Statement (the "Proxy
Statement") and incorporated by reference in Item 17(c) to this Statement.
The cross-reference sheet below is being supplied pursuant to General
Instruction F to the Schedule 13E-3 and shows the location in the Proxy
Statement of the information required to be included in response to the items of
this Statement. The information in the Proxy Statement, including all exhibits
thereto, is hereby expressly incorporated herein by reference and the responses
to each item in this Statement are qualified in their entirety by the
information contained in the Proxy Statement.
<PAGE>
CROSS REFERENCE SHEET
SCHEDULE 13E-3 ITEM: LOCATION IN THE PROXY STATEMENT:
- --------------------------- ---------------------------------------------------
Item 1(a) *
Item 1(b) "INTRODUCTION" AND "MARKET PRICES FOR THE COMMON
STOCK"
Item 1(c) "MARKET PRICES FOR THE COMMON STOCK"
Item 1(d) "DIVIDENDS"
Item 1(e) **
Item 1(f) "PURCHASES OF COMMON STOCK BY CERTAIN PERSONS"
Item 2(a)--(d) and (g) "INTRODUCTION", ""BUSINESS OF THE COMPANY",
"CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI
AND MERGER SUB" and "DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY, GOLD KIST, MERGER SUB AND
THE SURVIVING CORPORATION"
Item 2(e)--(f) *
Item 3(a)(1) "SPECIAL FACTORS--Interests of Certain Persons in
the Merger; Certain Relationships"
Item 3(a)(2) "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "SUMMARY--GENERAL--Structure of
the Merger," "SUMMARY--THE MERGER AGREEMENT,"
"SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of the
Merger," "THE MERGER AGREEMENT" and EXHIBIT
A--"MERGER AGREEMENT"
Item 3(b) "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "INTRODUCTION--Voting Rights;
Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special Meeting;
Quorum; Vote Required,"
"SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Interests of Certain Persons in
the Merger; Conflicts of Interest," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the Merger,"
"SPECIAL FACTORS--Interests of Certain Persons in
the Merger; Certain Relationships," "CERTAIN
INFORMATION CONCERNING GOLD KIST, AGRI AND MERGER
SUB" and "SECURITY OWNERSHIP OF THE COMPANY"
Item 4(a) "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "SUMMARY--GENERAL--Structure of
the Merger," "SUMMARY--THE MERGER AGREEMENT,"
"SPECIAL FACTORS--Purpose and Structure of the
Merger," "THE MERGER AGREEMENT" AND EXHIBIT
A--"MERGER AGREEMENT"
<PAGE>
Item 4(b) "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "SUMMARY--GENERAL--Structure of
the Merger," "SUMMARY--GENERAL--Certain Effects of
the Merger," "SUMMARY--GENERAL--Interests of
Certain Persons in the Merger; Conflicts of
Interest," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Purpose and Structure
of the Merger," "SPECIAL FACTORS--Certain Effects
of the Merger," "SPECIAL FACTORS--Interests of
Certain Persons in the Merger; Certain
Relationships," "THE MERGER AGREEMENT--General,"
"THE MERGER AGREEMENT--Consideration to be
Received by Shareholders of the Company," "CERTAIN
INFORMATION CONCERNING GOLD KIST, AGRI AND MERGER
SUB," "SECURITY OWNERSHIP OF THE COMPANY" and
EXHIBIT A--"MERGER AGREEMENT"
Item 5(a)--(g) "SUMMARY--GENERAL--Plans for the Company After the
Merger," "SUMMARY--GENERAL--Certain Effects of the
Merger," "SUMMARY--SOURCE OF FUNDS FOR THE
MERGER," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Plans for the Company
After the Merger," "SPECIAL FACTORS--Certain
Effects of the Merger," "THE MERGER AGREEMENT--The
Surviving Corporation," "DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY, GOLD KIST, MERGER SUB AND
THE SURVIVING CORPORATION--Information Concerning
Directors and Executive Officers of the Surviving
Corporation" and EXHIBIT A--"MERGER AGREEMENT"
Item 6(a)--(c) "SOURCE OF FUNDS FOR THE MERGER"
Item 6(d) **
Item 7(a) and (c) "SUMMARY--GENERAL--Certain Effects of the Merger,"
"SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of the
Merger" and "SPECIAL FACTORS--Certain Effects of
the Merger"
Item 7(b) "SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Report of Financial Advisor of
Gold Kist" and "SPECIAL FACTORS--Purpose and
Structure of the Merger"
Item 7(d) "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "SUMMARY--GENERAL--Structure of
the Merger," "SUMMARY-GENERAL--Plans for the
Company After the Merger,"
"SUMMARY--GENERAL--Certain Effects of the Merger,"
"SUMMARY--GENERAL--Interests of Certain Persons in
the Merger; Conflicts of Interest,"
"SUMMARY--GENERAL--Federal Income Tax
Consequences," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Purpose and Structure
of the Merger," "SPECIAL FACTORS--Plans for the
Company After the Merger," "SPECIAL
FACTORS--Certain Effects of the Merger," "SPECIAL
FACTORS--Interests of Certain Persons in the
Merger; Certain Relationships," "SPECIAL
FACTORS--Certain Federal Income Tax Consequences
of the Merger," "THE MERGER AGREEMENT--General,"
"THE MERGER AGREEMENT--The Surviving Corporation,"
"THE MERGER AGREEMENT--Consideration to be
Received by Shareholders of the Company," "SOURCE
OF FUNDS FOR THE MERGER," "SECURITY OWNERSHIP OF
THE COMPANY," "DIRECTORS AND OFFICERS OF THE
COMPANY, GOLD KIST, MERGER SUB AND THE SURVIVING
CORPORATION--Information Concerning Directors and
Executive Officers of the Surviving Corporation"
and EXHIBIT A--"MERGER AGREEMENT"
<PAGE>
Item 8(a)-(b) "SUMMARY--GENERAL--Determination of Special
Committee; Recommendation of the Company's Board
of Directors" and "SPECIAL
FACTORS--Recommendations of the Special Committee,
the Board and Gold Kist"
Item 8(c) "INTRODUCTION--Voting Rights; Vote Required for
Approval," "SUMMARY--GENERAL--Purpose of the
Special Meeting; Quorum; Vote Required,"
"SUMMARY--THE MERGER AGREEMENT--Conditions to
Consummation of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the Merger,"
"THE MERGER AGREEMENT--Conditions to Consummation
of the Merger" and EXHIBIT A--"MERGER AGREEMENT"
Item 8(d) "SUMMARY--GENERAL--Opinion of Financial Advisor to
Special Committee," "SPECIAL FACTORS--Background
of the Merger," "SPECIAL FACTORS--Opinion of
Special Committee's Financial Advisor" and EXHIBIT
C--"OPINION OF THE ROBINSON-HUMPHREY COMPANY, INC."
Item 8(e) "SUMMARY--GENERAL--Determination of Special
Committee; Recommendation of Company's Board of
Directors," "SPECIAL FACTORS--Background of the
Merger" and "SPECIAL FACTORS--Recommendations of
the Special Committee, the Board and Gold Kist"
Item 8(f) **
Item 9(a)-(c) "SUMMARY--GENERAL--Opinion of Financial Advisor to
Special Committee," "SUMMARY--GENERAL--Report of
Financial Advisor of Gold Kist," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Opinion of Special Committee's Financial
Advisor," "SPECIAL FACTORS--Report of Financial
Advisor of Gold Kist," EXHIBIT C--"OPINION OF THE
ROBINSON-HUMPHREY COMPANY, INC." and EXHIBIT
D--"OPINION OF SUNTRUST CAPITAL MARKETS, INC."
Item 10(a) "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "INTRODUCTION--Voting Rights;
Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special Meeting;
Quorum; Vote Required,"
"SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Interests of Certain Persons in
the Merger; Conflicts of Interest," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the Merger,"
"SPECIAL FACTORS--Interests of Certain Persons in
the Merger; Certain Relationships," "CERTAIN
INFORMATION CONCERNING GOLD KIST, AGRI AND MERGER
SUB" and "SECURITY OWNERSHIP OF THE COMPANY"
Item 10(b) "PURCHASES OF COMMON STOCK BY CERTAIN PERSONS"
<PAGE>
Item 11 "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "INTRODUCTION--Voting Rights;
Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special Meeting;
Quorum; Vote Required,"
"SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Plans for the Company After the
Merger," "SUMMARY--GENERAL--Interests of Certain
Persons in the Merger; Conflicts of Interest,"
"SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of the
Merger," "SPECIAL FACTORS--Plans for the Company
After the Merger," "SPECIAL FACTORS--Interests of
Certain Persons in the Merger; Certain
Relationships," "SPECIAL FACTORS--Certain
Litigation," "CERTAIN INFORMATION CONCERNING GOLD
KIST, AGRI AND MERGER SUB" and "SECURITY OWNERSHIP
OF THE COMPANY"
Item 12(a) "INTRODUCTION--Proposal to be Considered at the
Special Meeting," "INTRODUCTION--Voting Rights;
Vote Required for Approval,"
"SUMMARY--GENERAL--Purpose of the Special Meeting;
Quorum; Vote Required,"
"SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Interests of Certain Persons in
the Merger; Conflicts of Interest," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL
FACTORS--Purpose and Structure of the Merger,"
"SPECIAL FACTORS--Interests of Certain Persons in
the Merger; Certain Relationships," "THE MERGER
AGREEMENT--Consideration to be Received by
Shareholders of the Company," "CERTAIN INFORMATION
CONCERNING GOLD KIST, AGRI AND MERGER SUB,"
"SECURITY OWNERSHIP OF THE COMPANY" and EXHIBIT
A--"MERGER AGREEMENT"
Item 12(b) "SUMMARY--GENERAL--Determination of Special
Committee; Recommendation of Company's Board of
Directors," "SPECIAL FACTORS--Recommendations of
the Special Committee, the Board and Gold Kist"
and "SECURITY OWNERSHIP OF THE COMPANY"
Item 13(a) "INTRODUCTION--Voting Rights; Vote Required for
Approval," "SUMMARY--THE MERGER
AGREEMENT--Dissenters' Rights," "SPECIAL
FACTORS--Purpose and Structure of the Merger,"
"DISSENTERS' RIGHTS" and EXHIBIT B--"ARTICLE 13 OF
THE GEORGIA BUSINESS CORPORATION CODE"
Item 13(b)-(c) **
Item 14(a) "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,"
"SELECTED HISTORICAL FINANCIAL INFORMATION OF THE
COMPANY," "INDEPENDENT AUDITORS" and "INDEX TO
FINANCIAL STATEMENTS"
Item 14(b) **
Item 15(a) "SUMMARY--GENERAL--Plans for the Company After the
Merger" and "SPECIAL FACTORS--Plans for the
Company After the Merger"
Item 16 "INTRODUCTION--Proxies"
Item 17 *
- ------------------
* Information is contained in this Statement
** Not applicable
<PAGE>
ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.
(a) The issuer of the class of equity securities which is the subject
of the Rule 13e-3 transaction is the Company. The address of the Company's
principal executive offices is 244 Perimeter Center Parkway, N.E., Atlanta,
Georgia 30346.
(b) The information set forth in "INTRODUCTION" and "MARKET PRICES FOR
THE COMMON STOCK" in the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "MARKET PRICES FOR THE COMMON STOCK"
in the Proxy Statement is incorporated herein by reference.
(d) The information set forth in "DIVIDENDS" in the Proxy Statement
is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in "PURCHASE OF COMMON STOCK BY CERTAIN
PERSONS" in the Proxy Statement is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This statement is being filed by the Company, the issuer of the
class of equity securities which is the subject of the Rule 13e-3 transaction,
by Gold Kist and by Merger Sub. The information set forth in "INTRODUCTION,"
"BUSINESS OF THE COMPANY," "CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI AND
MERGER SUB" and "DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, GOLD KIST,
MERGER SUB AND THE SURVIVING CORPORATION" in the Proxy Statement is incorporated
herein by reference.
(e)-(f) None of the Company, Gold Kist, Agri and Merger Sub or, to the
best of their knowledge, any of the persons listed under "DIRECTORS AND
EXECUTIVE OFFICERS OF THE COMPANY, GOLDKIST, MERGER SUB AND THE SURVIVING
CORPORATION" in the Proxy Statement, has during the last five years (i) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining further
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.
(a)(1) The information set forth in "SPECIAL FACTORS--Interests of
Certain Persons in the Merger; Certain Relationships" of the Proxy Statement is
incorporated herein by reference.
(a)(2) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--THE MERGER AGREEMENT," "SPECIAL FACTORS--Background of the Merger,"
"SPECIAL FACTORS--Purpose and Structure of the Merger," "THE MERGER AGREEMENT"
and EXHIBIT A--"MERGER AGREEMENT" of the Proxy Statement is incorporated herein
by reference.
(b) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--
Interests of Certain Persons in the Merger; Conflicts of Interest," "SPECIAL
<PAGE>
FACTORS--Background of the Merger, "SPECIAL FACTORS--Purpose and Structure of
the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Merger;
Certain Relationships," "CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI AND
MERGER SUB," and "SECURITY OWNERSHIP OF THE COMPANY" of the Proxy Statement is
incorporated herein by reference.
ITEM 4. TERMS OF THE TRANSACTION.
(a) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--THE MERGER AGREEMENT," "SPECIAL FACTORS--Purpose and Structure of the
Merger," "THE MERGER AGREEMENT" and EXHIBIT A--"MERGER AGREEMENT" of the Proxy
Statement is incorporated herein by reference.
(b) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Certain Effects of the Merger," "SUMMARY--GENERAL--Interests
of Certain Persons in the Merger; Conflicts of Interest", "SPECIAL FACTORS--
Background of the Merger," "SPECIAL FACTORS--Purpose and Structure of the
Merger," "SPECIAL FACTORS--Certain Effects of the Merger," "SPECIAL FACTORS--
Interests of Certain Persons in the Merger; Certain Relationships," "THE MERGER
AGREEMENT--General," "THE MERGER AGREEMENT--Consideration to be Received by
Shareholders of the Company," "CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI
AND MERGER SUB," "SECURITY OWNERSHIP OF THE COMPANY" and EXHIBIT A--"MERGER
AGREEMENT" of the Proxy Statement is incorporated herein by reference.
ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.
(a)-(g) The information set forth in "SUMMARY--GENERAL--Certain
Effects of the Merger," "SUMMARY--GENERAL--Plans for the Company After the
Merger," "SUMMARY--THE MERGER AGREEMENT--Source Of Funds," "SPECIAL FACTORS--
Background of the Merger," "SPECIAL FACTORS--Plans for the Company After the
Merger," "SPECIAL FACTORS--Certain Effects of the Merger," "THE MERGER
AGREEMENT--The Surviving Corporation," "DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY, GOLD KIST, MERGER SUB AND THE SURVIVING CORPORATION--Information
Concerning Directors and Executive Officers of the Surviving Corporation" and
EXHIBIT A--"MERGER AGREEMENT" of the Proxy Statement is incorporated herein by
reference.
ITEM 6. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in "THE MERGER AGREEMENT--Expenses"
and "SOURCE OF FUNDS OF THE MERGER" of the Proxy Statement is incorporated
herein by reference.
(d) Not applicable.
ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.
(a) and (c) The information set forth in "SUMMARY--GENERAL--Certain Effects of
the Merger," "SPECIAL FACTORS--Background of the Merger," "SPECIAL FACTORS--
Purpose and Structure of the Merger" and "SPECIAL FACTORS--Certain Effects of
the Merger" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Report of Financial Advisor of Gold Kist" and
"SPECIAL FACTORS--Purpose and Structure of the Merger" of the Proxy Statement is
incorporated herein by reference.
<PAGE>
(d) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "SUMMARY--GENERAL--Structure of the Merger,"
"SUMMARY--GENERAL--Plans for the Company After the Merger," "SUMMARY--GENERAL--
Certain Effects of the Merger," "SUMMARY--GENERAL--Interests of Certain Persons
in the Merger; Conflicts of Interest," "SUMMARY--GENERAL--Federal Income Tax
Consequences," "SPECIAL FACTORS--Background of the Merger," "SPECIAL FACTORS--
Purpose and Structure of the Merger," "SPECIAL FACTORS--Plans for the Company
After the Merger," "SPECIAL FACTORS--Certain Effects of the Merger," "SPECIAL
FACTORS--Interests of Certain Persons in the Merger; Certain Relationships,"
"SPECIAL FACTORS--Certain Federal Income Tax Consequences of the Merger," "THE
MERGER AGREEMENT--General," "THE MERGER AGREEMENT--The Surviving Corporation,"
"THE MERGER AGREEMENT--Consideration to be Received by Shareholders of the
Company," "SOURCE OF FUNDS FOR THE MERGER," "SECURITY OWNERSHIP OF THE COMPANY,"
"DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, GOLD KIST, MERGER SUB AND THE
SURVIVING CORPORATION--Information Concerning Directors and Executive Officers
of the Surviving Corporation" and EXHIBIT A--"MERGER AGREEMENT" of the Proxy
Statement is incorporated herein by reference.
ITEM 8. FAIRNESS OF THE TRANSACTION.
(a)--(b) The information set forth in "SUMMARY--GENERAL--Determination
of Special Committee; Recommendation of the Company's Board of Directors" and
"SPECIAL FACTORS--Recommendations of the Special Committee, the Board and Gold
Kist," of the Proxy Statement is incorporated herein by reference.
(c) The information set forth in "INTRODUCTION--Voting Rights; Vote
Required for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting;
Quorum; Vote Required," "SUMMARY--THE MERGER AGREEMENT--Conditions to
Consummation of the Merger," "SPECIAL FACTORS--Purpose and Structure of the
Merger," "THE MERGER AGREEMENT--Conditions to Consummation of the Merger" and
EXHIBIT A--"MERGER AGREEMENT" of the Proxy Statement is incorporated herein by
reference.
(d) The information set forth in "SUMMARY--GENERAL--Opinion of
Financial Advisor to Special Committee," "SPECIAL FACTORS--Background of the
Merger," "SPECIAL FACTORS--Opinion of Special Committee's Financial Advisor" and
EXHIBIT C--"OPINION OF THE ROBINSON-HUMPHREY COMPANY, INC." of the Proxy
Statement is incorporated herein by reference.
(e) The information set forth in "SUMMARY--GENERAL--Determination of
Special Committee; Recommendation of Company's Board of Directors," "SPECIAL
FACTORS--Background of the Merger" and "SPECIAL FACTORS--Recommendations of the
Special Committee, the Board and Gold Kist" of the Proxy Statement is
incorporated herein by reference.
(f) Not applicable.
ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.
(a)--(c) The information set forth in "SUMMARY--GENERAL--Opinion of
Financial Advisor to Special Committee," "SUMMARY--GENERAL--Report of Financial
Advisor of Gold Kist," "SPECIAL FACTORS--Background of the Merger," "SPECIAL
FACTORS--Opinion of Special Committee's Financial Advisor," "SPECIAL FACTORS--
Report of Financial Advisor of Gold Kist," EXHIBIT C--"OPINION OF THE ROBINSON-
HUMPHREY COMPANY, INC." and EXHIBIT D--"OPINION OF SUNTRUST CAPITAL MARKETS,
INC." of the Proxy Statement is incorporated herein by reference.
<PAGE>
ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.
(a) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--
Interests of Certain Persons in the Merger; Conflicts of Interest," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Purpose and Structure of
the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Merger;
Certain Relationships," "CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI AND
MERGER SUB" and "SECURITY OWNERSHIP OF THE COMPANY" of the Proxy Statement is
incorporated herein by reference.
(b) The information set forth in "PURCHASES OF COMMON STOCK BY CERTAIN
PERSONS" of the Proxy Statement is incorporated herein by reference.
ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.
The information set forth in "INTRODUCTION--Proposal to be Considered
at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required for
Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--Plans
for the Company After the Merger," "SUMMARY--GENERAL--Interests of Certain
Persons in the Merger; Conflicts of Interest," "SPECIAL FACTORS--Background of
the Merger," "SPECIAL FACTORS--Purpose and Structure of the Merger," "SPECIAL
FACTORS--Plans for the Company After the Merger," "SPECIAL FACTORS--Interests of
Certain Persons in the Merger; Certain Relationships," "SPECIAL FACTORS--Certain
Litigation," "CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI AND MERGER SUB" and
"SECURITY OWNERSHIP OF THE COMPANY" of the Proxy Statement is incorporated
herein by reference.
ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.
(a) The information set forth in "INTRODUCTION--Proposal to be
Considered at the Special Meeting," "INTRODUCTION--Voting Rights; Vote Required
for Approval," "SUMMARY--GENERAL--Purpose of the Special Meeting; Quorum; Vote
Required," "SUMMARY--GENERAL--Structure of the Merger," "SUMMARY--GENERAL--
Interests of Certain Persons in the Merger; Conflicts of Interest," "SPECIAL
FACTORS--Background of the Merger," "SPECIAL FACTORS--Purpose and Structure of
the Merger," "SPECIAL FACTORS--Interests of Certain Persons in the Merger;
Certain Relationships," "THE MERGER AGREEMENT--Consideration to be Received by
Shareholders of the Company," "CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI
AND MERGER SUB," "SECURITY OWNERSHIP OF THE COMPANY" and EXHIBIT A--"MERGER
AGREEMENT" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "SUMMARY--GENERAL--Determination of
Special Committee; Recommendation of Company's Board of Directors," "SPECIAL
FACTORS--Recommendations of the Special Committee, the Board and Gold Kist," and
"SECURITY OWNERSHIP OF THE COMPANY" of the Proxy Statement is incorporated
herein by reference.
ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.
(a) The information set forth in "INTRODUCTION--Voting Rights; Vote
Required for Approval," "SUMMARY--THE MERGER AGREEMENT--Dissenters' Rights,"
"SPECIAL FACTORS--Purpose and Structure of the Merger," "DISSENTERS' RIGHTS" and
EXHIBIT B--"ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE" of the Proxy
Statement is incorporated herein by reference.
(b)--(c) Not applicable.
<PAGE>
ITEM 14. FINANCIAL INFORMATION.
(a) The information set forth in "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE," "SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY,"
"INDEPENDENT AUDITORS" AND "INDEX TO FINANCIAL STATEMENTS" of the Proxy
Statement is incorporated herein by reference.
(b) Not applicable.
ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.
(a) The information set forth in "SUMMARY--GENERAL--Plans for the
Company After the Merger" and "SPECIAL FACTORS--Plans for the Company After the
Merger" of the Proxy Statement is incorporated herein by reference.
(b) The information set forth in "INTRODUCTION--Proxies" of the Proxy
Statement is incorporated herein by reference.
ITEM 16. ADDITIONAL INFORMATION.
The information set forth in the Proxy Statement is incorporated
herein by reference in its entirety.
ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.
(b)(1) Opinion of The Robinson-Humphrey Company, Inc. (attached as
Exhibit C to the Proxy Statement).
(b)(2) The Robinson-Humphrey Company, Inc. Presentation to the
Board of Directors of the Company, dated April 22, 1997.
(b)(3) Opinion of SunTrust Capital Markets, Inc. (attached as
Exhibit D to the Proxy Statement).
(b)(4) SunTrust Capital Markets, Inc. Presentation to the Board of
Directors of Gold Kist, dated April 25, 1997.
(c) Agreement and Plan of Merger dated as of April 22, 1997
among the Company, Gold Kist, Agri and Merger Sub (attached
as Exhibit A to the Proxy Statement).
(d)(1) Preliminary Proxy Statement dated May 8, 1997.
(d)(2) Notice of Special Meeting of Shareholders (included in Proxy
Statement).
(d)(3) Proxy Card.
(d)(4) Press Release issued jointly by Gold Kist and the Company on
January 23, 1997.
<PAGE>
(d)(5) Press Release issued jointly by Gold Kist and the Company on
April 11, 1997.
(d)(6) Chief Executive Officer's Letter to Shareholders (included
in Proxy Statement).
(e) Text of Article 13 of the Georgia Business Corporation Code
(attached as Exhibit B to the Proxy Statement).
(f) Not Applicable.
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
GOLDEN POULTRY COMPANY, INC.
By: /s/ Jack L. Lawing
--------------------------------
Name: Jack L. Lawing
Title: Secretary
May 8, 1997
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
GOLD KIST INC.
By: /s/ Jack L. Lawing
----------------------------
Name: Jack L.Lawing
Title: Secretary
May 8, 1997
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
GOLDEN POULTRY ACQUISITION CORP.
By: /s/ Jack L. Lawing
-------------------------------
Name: Jack L. Lawing
Title: Secretary
May 8, 1997
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
(b)(1) Opinion of The Robinson-Humphrey Company, Inc. (attached as Exhibit C
to the Proxy Statement).
(b)(2) The Robinson-Humphrey Company, Inc. Presentation to the Board of
Directors of the Company, dated April 22, 1997.
(b)(3) Opinion of SunTrust Capital Markets, Inc. (attached as
Exhibit D to the Proxy Statement).
(b)(4) SunTrust Capital Markets, Inc. Presentation to the Board of Directors
of Gold Kist, dated April 25, 1997.
(c)(1) Agreement and Plan of Merger dated as of April 22, 1997 among the
Company, Gold Kist, Agri and Merger Sub (attached as Exhibit A to the
Proxy Statement).
(d)(1) Preliminary Proxy Statement dated May 8, 1997.
(d)(2) Notice of Special Meeting of Shareholders (included in Proxy
Statement).
(d)(3) Proxy Card.
(d)(4) Press Release issued jointly by Gold Kist and the Company on January
23, 1997.
(d)(5) Press Release issued jointly by Gold Kist and the Company on April 11,
1997.
(d)(6) Chief Executive Officer's letter to Shareholders (included in Proxy
Statement).
(e) Text of Article 13 of the Georgia Business Corporation Code (attached
as Exhibit B to the Proxy Statement).
<PAGE>
EXHIBIT (b)(2)
INVESTMENT BANKING PRESENTATION
TO
THE BOARD OF DIRECTORS OF
GOLDEN POULTRY COMPANY, INC.
APRIL 22, 1997
THE ROBINSON-HUMPHREY COMPANY, INC.
INVESTMENT BANKERS SINCE 1894
<PAGE>
Table of Contents
- --------------------------------------------------------------------------------
I. 10-Year and Year-to-Date Financial Overview
II. Industry Overview
III. Market Comparison of Selected Public Companies and Implied Valuation
Analysis
IV. Discounted Cash Flow Model
V. Analysis of Premiums in Going Private Transactions Involving Minority
Interest Positions
VI. Adjusted Book Value Analysis
VII. Valuation Analysis Based on Weekly Live Heads Capacity
Appendix
- --------
A. Comparable Company Information
[excerpts from Standard & Poor's Stock Reports on Cagle's, Inc.,
Hudson Foods, Inc., Pilgrim's Pride Corporation, Sanderson Farms,
Inc., Seaboard Corporation, Tyson Foods, Inc. and WLR Foods, Inc.]
<PAGE>
PROJECT BANTAM
10-YEAR HISTORICAL FINANCIAL STATEMENTS
---------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Years Ended June
----------------------------------------------------------------------------------------------------------
1987 1988 1989 1990 1991 1992 1993 1994 1995
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $121,618 $142,320 $194,790 $204,861 $260,970 $336,806 $388,330 $447,139 $505,975
% Growth -- 17.0% 36.9% 5.2% 27.4% 29.1% 15.3% 15.1% 13.2%
Cost Sales 100,416 135,422 168,513 188,305 247,987 330,759 363,407 427,607 486,064
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross Profit 21,202 6,898 26,277 16,556 12,983 6,047 24,923 19,532 19,911
Margin % 17.4% 4.8% 13.5% 8.1% 5.0% 1.8% 6.4% 4.4% 3.9%
Operating Expenses 6,440 5,074 8,376 8,619 10,805 13,120 15,272 16,122 16,687
% of Net Sales 5.3% 3.6% 4.3% 4.2% 4.1% 3.9% 3.9% 3.6% 3.3%
Add back D&A (1,827) (2,865) (3,504) (5,247) (8,595) (15,004) (15,657) (16,411) (16,905)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
EBITA 16,589 4,689 21,405 13,184 10,773 7,931 25,308 19,821 20,129
% of Net Sales 13.6% 3.3% 11.0% 6.4% 4.1% 2.4% 6.5% 4.4% 4.0%
D&A 1,827 2,865 3,504 5,247 8,595 15,004 15,657 16,411 16,905
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating Income 14,762 1,824 17,901 7,937 2,178 (7,073) 9,651 3,410 3,224
% of Net Sales 12.1% 1.3% 9.2% 3.9% 0.8% -2.1% 2.5% 0.8% 0.6%
Other Expense (Income) (47) (196) (66) (174) (293) (767) (1,044) (299) (381)
Interest Expense, Net (963) (197) (782) (1,042) (31) 2,267 2,292 1,244 1,691
Minority Interest - - - - (1,917) (5,751) (4,102) (3,259) (1,965)
---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Pretax Income 15,772 2,217 18,749 9,153 4,419 (2,822) 12,505 5,724 3,879
Margin % 13.0% 1.6% 9.6% 4.5% 1.7% -8.0% 3.2% 1.3% 0.8%
Income Taxes 7,375 877 7,131 3,427 1,621 (1,044) 4,642 1,676 1,132
Tax Rate 46.8% 39.6% 38.0% 37.4% 36.7% 37.0% 37.1% 29.3% 29.2%
Net Income $8,397 $1,340 $11,618 $5,726 $2,798 ($1,778) $7,863 $4,048 $2,747
========== ========== ========== ========== ========== ========== ========== ========== ==========
EPS $1.12 $0.14 $1.20 $0.45 $0.20 ($0.12) $0.53 $0.27 $0.19
========== ========== ========== ========== ========== ========== ========== ========== ==========
<CAPTION>
Six Months Ended Dec.
---------- ----------------------
1996 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net Sales $600,237 $287,866 $357,704
% Growth 18.6% -- 24.3%
Cost Sales 552,184 262,247 334,326
---------- ---------- ----------
Gross Profit 48,053 25,619 23,378
Margin % 8.0% 8.9% 6.5%
Operating Expenses 20,999 10,551 10,923
% of Net Sales 3.5% 3.7% 3.1%
Add back D&A (15,499) (8,720) (6,423)
---------- ---------- ----------
EBITA 42,553 23,788 18,878
% of Net Sales 7.1% 8.3% 5.3%
D&A 15,499 8,720 6,423
---------- ---------- ----------
Operating Income 27,054 15,068 12,455
% of Net Sales 4.5% 5.2% 3.5%
Other Expense (Income) (208) (155) (58)
Interest Expense, Net 1,452 779 618
Minority Interest 243 (305) 1,385
---------- ---------- ----------
Pretax Income 25,567 14,749 10,510
Margin % 4.3% 5.1% 2.9%
Income Taxes 9,526 5,647 3,998
Tax Rate 37.3% 38.3% 38.0%
---------- ---------- ----------
Net Income $16,041 $9,102 $6,512
========== ========== ==========
EPS $1.10 $0.63 $0.45
========== ========== ==========
</TABLE>
<PAGE>
[Graph depicting Golden Poultry Company, Inc.'s
Ten Year Historical Broiler Price per Lb.,
Total Live Cost per Lb. and
Pretax Profit per Lb.]
<PAGE>
[Graph depicting Golden Poultry Company, Inc.'s
Ten Year Historical Price/Volume Analysis]
<PAGE>
[Graph depicting Golden Poultry Company, Inc.'s
Ten Year Trading History, charted against the
S&P 500 and an index of Publicly Traded Poultry Companies]
<PAGE>
Value-Added Matrix of Companies in the Food and Drink Industry
<TABLE>
<CAPTION>
Wholesale Oriented Diversified Commodity Demand Pull
Commodity Products Commodity Companies Driven Brands Consumer Brands
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Coca-Cola
Wrigley
Philip Morris (Kraft)
Campbell Soup
General Mills
Heinz
Ralston Purina
Profit Universal Foods Kellogg
Margin/ Sara Lee
ROE
Archer Daniels Quaker Oats
Dole Foods
Hudson Foods Flowers Industries Hormel Foods
Tyson Foods Interstate Bakeries McCormick & Co.
Bantam ConAgra
Cagle's Smithfield Foods IBP
Pilgrim's Pride Dean Foods
Sanderson Farms
WLR Foods
Low Seaboard
=========================================================================================================
Low Earnings Predictability/Valuation Multiples High
</TABLE>
<PAGE>
[Graph depicting a 10-year price index comparison
for Georgia Dock Broiler prices,
Corn prices and Soybean prices]
<PAGE>
[Graph depicting Golden Poultry Company, Inc.'s
10-Year Historical Operating Margin v. a
group of Publicly Traded Poultry Companies]
<PAGE>
[Graph depicting the Six Year Price/Earnings Multiple
for the Poultry Industry]
<PAGE>
<TABLE>
<CAPTION>
PROJECT BANTAM
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXPECT PER SHARE DATA)
HUDSON PILGRIM'S SANDERSON TYSON WLR
CAGLE'S FOODS, PRICE FARMS, SEABORD FOODS, FOODS,
INC. INC. CORP. INC. CORP. INC. INC.
---- ---- ----- ---- ---- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Ticker CGL/A HFI CHX SAFM SEB TYSNA WLRF
Exchange AMEX NYSE NYSE OTC AMEX OTC OTC
FYE MR SP SP OC DC SP JE
LTM Period Ended 12/96 12/96 12/96 1/97 12/96 12/96 12/96
CURRENT MARKET DATA
- -------------------
Market Price
18-Apr-97 $ 11.88 $ 14.88 $ 10.00 $ 14.75 $ 255.50 $ 19.88 $ 9.63
52 Week High $ 17.62 $ 21.25 $ 12.12 $ 19.25 $ 272.00 $ 23.87 $ 14.12
52 Week Low $ 10.87 $ 11.50 $ 6.62 $ 10.62 $ 196.00 $ 14.62 $ 9.25
Shares Outstanding (MM) 5.006 30.218 27.589 14.363 1.488 217.459 16.903
Market Cap'n ($MM) $ 59.4 $ 449.5 $ 275.9 $ 211.9 $ 380.1 $ 4,322.0 $ 162.7
Firm Value ($MM) [1] $ 119.0 $ 726.5 $ 470.4 $ 306.8 $ 577.6 $ 5.944.9 $ 303.2
Book Value ($MM) $ 50.9 $ 335.4 $ 152.8 $ 121.1 $ 365.8 $ 1,583.4 $ 144.7
EARNINGS AND VALUATION MULTIPLES
- --------------------------------
Earnings per Shares [2]
- -----------------------
LTM $ 0.22 $ 0.76 $ 0.24 $ 0.13 $ 1.91 $ 0.04 ($1.55)
Calendar 1997 NA $ 1.25 $ 1.15 F $ 1.25 F NA $ 1.23 ($0.97) F
Calendar 1998 NA $ 1.61 F NA NA NA $ 1.38 F $0.55 F
Change from 97 to 98 NA 28.8% NA NA NA 12.2% NM
Price/Earnings Ratio
- --------------------
LTM 54.0 x* 19.6 x 41.7 x* NM x NM x NM x NM x
Calendar 1997 NA 11.9 8.7 11.8 NA 16.2 NM
Calendar 1998 NA 9.2 NA NA NA 14.4 17.5 x
Other Valuation Multiples
- -------------------------
Market/Book 1.17 x 1.34 x 1.81 x 1.75 x 1.04 x 2.73 x 1.12 x
Firm Value/LTM Revenues 0.35 0.51 0.40 0.66 0.39 0.92 0.30
Firm Value/LTM EBITDA 25.6 * 10.7 8.2 10.9 8.2 12.0 NM
Firm Value/Proj. EBITDA [3] 9.9 7.7 5.8 5.2 NA 7.9 NA
Firm Value/LTM Oper. Inc. NM 17.9 16.2 37.3 x 29.3 23.1 NM
1994-1996 COMPOUNDED ANNUAL GROWTH RATES
- ----------------------------------------
Revenue -0.6% 15.1% 11.1% 10.7% 22.0% 12.4% 17.1%
Net Income 0.3% -7.7% NM NM -71.6% -35.1% NM
<CAPTION>
BANTAM HEAVY
------ -----
Ticker
Exchange OTC
FYE JE JE
LTM Period Ended 12/96 12/96
CURRENT MARKET DATA
- -------------------
Market Price $13.50 NM
18-Apr-97
52 Week High $13.37 NM
52 Week Low $ 8.50 NM
Shares Outstanding (MM) 14.624 NM
Market Cap'n ($MM) $197.4 NM
Firm Value ($MM)[1] $219.7 NM
Book Value ($MM) $110.6 $331.8
EARNINGS AND VALUATION MULTIPLES
- --------------------------------
Earnings per Shares [2]
- -----------------------
LTM $ 0.92 NM
Calendar 1997 ================== $ 1.00 F NM
Calendar 1998 AVERAGE NA NM
Change from 97 to 98 20.5% NA NM
Price/Earning Ratio
- -------------------
LTM 19.6 x 14.7 x NM x
Calendar 1997 12.1 13.5 NM
Calendar 1998 11.8 NA NM
Other Valuation Multiples
- -------------------------
Market/Book 1.6 x 1.78 x NM x
Firm Value/LTM Revenues 0.51 0.33 NM
Firm Value/LTM EBITDA 10.0 5.8 NM
Firm Value/PROJ. EBITDA [3] 6.6 7.0 NM
Firm Value/LTM Oper. Inc. 21.6 9.0 NM
1994-1996 COMPOUNDED ANNUAL GROWTH RATES
- ----------------------------------------
Revenue 12.5% 15.9% 11.9%
Net Income -28.5% 99.1% 4.3%
</TABLE>
___________________________________________________
* Excluded from average F - Fiscal Year Estimate
NM - Not Meaningful NA - Not Available
[1] Firm value equals market capitalization plus debt minus cash and cash
equivalents.
[2] EPS estimates are from First Call Research Network dated 4/18/97.
[3] Projected EBITDA data taken from industry report dated 9/16/96.
<PAGE>
<TABLE>
<CAPTION>
PROJECT BANTAM
OPERATING COMPARISON OF SELECTED PUBLIC COMPANIES
- ----------------------------------------------------------------------------------------------------------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
HUDSON PILGRIM'S SANDERSON TYSON WLR
CAGLE'S, FOODS, PRIDE FARMS, SEABOARD FOODS, FOODS, -----------
INC. INC. CORP. INC. CORP. INC. INC. AVERAGE
---- ---- ----- ---- ----- ---- ---- -----------
FYE MR SP SP OC DC SP JE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LTM Period Ended 12/96 12/96 12/96 1/97 12/96 12/96 12/96
ANNUAL DATA
- -----------
Sales
LTM [1] $339.0 $1,429.1 $1,169.6 $467.0 $1,464.4 $6,434.9 $1,015.6
1996 308.7 1,378.5 1,139.3 455.1 1,464.4 6,453.8 997.6
1995 349.8 1,200.5 931.8 392.9 1,174.0 5,511.2 908.8
1994 312.7 1,040.8 922.6 371.5 983.8 5,110.3 727.3
1994-96 CAGR -0.6% 15.1% 11.1% 10.7% 22.0% 12.4% 17.1% 12.5%
Gross Margin
LTM [1] 4.3% 12.0% 6.8% 5.7% 10.1% 14.4% 6.1% 8.5%
1996 5.6% 12.1% 6.2% 4.0% 10.1% 14.7% 10.0% 9.0%
1995 9.7% 14.7% 8.0% 9.4% 14.5% 19.7% 13.6% 12.8%
1994 8.5% 14.9% 12.0% 11.4% 16.2% 18.8% 13.0% 13.5%
7.9% 13.9% 8.7% 8.3% 13.6% 17.7% 12.2% 11.8%
EBITDA Margin
LTM [1] 1.4% 4.8% 4.9% 6.0% 4.8% 7.7% -0.3% 4.2%
1996 2.2% 4.8% 4.3% 4.6% 4.8% 7.9% 3.1% 4.5%
1995 6.6% 7.5% 5.5% 10.1% 6.5% 12.3% 6.3% 7.8%
1994 5.8% 7.1% 9.2% 11.8% 8.2% 11.7% 7.2% 8.7%
1994-96 Average 4.9% 6.4% 6.3% 8.8% 6.5% 10.6% 5.5% 7.0%
Operating Margin
LTM [1] -0.6% 2.8% 2.5% 1.8% 1.3% 4.0% -3.2% 1.2%
1996 0.5% 2.9% 1.9% 0.3% 1.3% 4.2% 0.2% 1.6%
1995 5.3% 5.4% 2.7% 5.4% 2.7% 8.6% 3.6% 4.8%
1994 4.2% 4.9% 6.5% 7.6% 4.8% 8.0% 4.3% 5.8%
1994-96 Average 3.4% 4.4% 3.7% 4.4% 2.9% 6.9% 2.7% 4.1%
Net Margin
LTM [1] 0.3% 1.6% 0.5% 0.4% 0.2% 1.4% -2.7% 0.3%
1996 2.8% 1.7% -0.4% -0.5% 0.2% 1.3% -0.5% 0.7%
1995 3.9% 3.0% -0.9% 2.8% 1.7% 4.0% 1.8% 2.3%
1994 2.8% 2.6% 3.4% 4.2% 3.6% 4.0% 2.3% 3.3%
1994-96 Average 3.2% 2.4% 0.7% 2.1% 1.8% 3.1% 1.2% 2.1%
EPS
LTM [1] 0.22 0.76 0.24 0.13 1.91 0.40 (1.55)
1996 1.73 0.76 (0.16) (0.18) 1.91 0.40 (0.27)
1995 2.67 1.21 (0.29) 0.80 13.58 1.01 0.90
1994 1.66 1.08 1.13 1.14 23.67 0.93 1.01
1994-96 CAGR 2.1% -16.1% NM NM NM NM NM -7.0%
INTERIM DATA
- ------------
YTD Period Ended 12/96 12/96 12/96 1/97 12/96 12/96 12/96
Sales
1996 $261.3 $391.3 $297.8 $115.6 $1,464.4 $1,527.9 $536.6
1995 $231.1 $340.7 $267.5 $103.8 $1,174.0 $1,546.8 $518.6
% Change 13.1% 14.9% 11.3% 11.5% 24.7% -1.2% 3.5% 11.1%
EPS
1996 ($0.13) $0.30 $0.37 $0.25 $1.91 $0.20 ($0.76)
1995 1.38 0.30 (0.03) (0.06) 13.58 0.20 0.52
% Change NM 0.0% NM NM NM 0.0% NM 0.0%
-----------
<CAPTION>
BANTAM HEAVY
------ -----
JE JE
<S> <C> <C>
LTM Period Ended 12/96 12/96
ANNUAL DATA
- -----------
Sales
LTM [1] $670.1 $2,143.7
1996 600.2 1,955.6
1995 506.0 1,688.5
1994 447.1 1,561.0
1994-96 CAGR 15.9% 11.9%
Gross Margin
LTM [1] 6.8% 9.5%
1996 8.0% 11.5%
1995 3.9% 9.9%
1994 4.4% 11.3%
5.4% 10.9%
EBITDA Margin
LTM [1] 5.6% 3.7%
1996 7.1% 5.5%
1995 4.0% 4.3%
1994 4.4% 5.9%
1994-96 Average 5.2% 5.3%
Operating Margin
LTM [1] 3.6% 1.9%
1996 4.5% 3.5%
1995 0.6% 2.1%
1994 0.8% 3.5%
1994-96 Average 2.0% 3.0%
Net Margin
LTM [1] 2.0% 0.8%
1996 2.7% 1.9%
1995 0.5% 0.7%
1994 0.9% 2.2%
1994-96 Average 1.4% 1.6%
EPS
LTM [1] $0.92 NM
1996 1.10 NM
1995 0.19 NM
1994 0.27 NM
1994-96 CAGR NM NM
INTERIM DATA
- ------------
YTD Period Ended 12/96
Sales $357.7 $1,057.1
1996 287.9 869.0
1995 24.3% 21.6%
% Change
EPS
1996 $0.45 NM
1995 0.63 NM
% Change -28.6% NM
</TABLE>
________________________________
[1] For the purposes of comparabilitiy, LTM data are derived from the company's
most recent 10-K or 10-Q filing
<PAGE>
PROJECT BANTAM
CAPITALIZATION COMPARISON OF SELECTED PUBLIC COMPANIES
- --------------------------------------------------------------------------------
(Dollars in Million)
<TABLE>
<CAPTION>
Hudson Pilgrims Sanderson Tyson
Cagle's Foods, Pride Farms, Seabord Foods,
Inc. Inc. Corp. Inc. Corp. Inc.
---- ---- ----- ---- ----- ----
FYE MR SP SP OC DC SP
<S> <C> <C> <C> <C> <C> <C>
LTM Period as of: 12/96 12/96 12/96 1/97 12/96 12/96
Total Assets
LTM (1) $139.6 $815.9 $525.6 $246.3 $878.1 $4,364.1
1996 142.7 774.7 536.7 237.2 878.1 4,544.1
1995 88.8 623.5 497.6 193.2 675.2 4,444.3
Total Cash (2)
LTM (1) $0.9 $21.2 $17.4 $2.1 $140.7 $116.4
1996 0.3 6.4 18.0 4.9 140.7 36.6
1995 0.5 2.2 11.9 0.4 179.4 33.1
Current Ratio
LTM (1) 2.7 x 3.0 x 1.9 x 3.7 x 2.3 x 2.9 x
1996 2.8 2.4 1.6 4.5 2.3 2.6
1995 1.7 2.6 1.8 4.6 3.3 1.8
Total Debt (3)
LTM (1) $60.4 $298.2 $212.0 $97.1 $338.3 $1,739.3
1996 60.1 249.7 225.3 93.2 338.3 1,975.1
1995 16.8 151.0 196.0 55.0 201.7 1,984.7
Stockholders' Equity
LTM (1) $50.9 $335.4 $152.8 $121.1 $365.8 $1,583.4
1996 52.0 325.9 143.1 118.3 365.8 1,541.7
1995 44.4 304.3 152.1 114.3 346.1 1,467.7
Total Debt/Equity
LTM (1) 118.7 % 88.9 % 138.7 % 80.2 % 92.5 % 109.8 %
1996 115.5 76.6 157.4 78.8 92.5 128.1
1995 37.9 NM 128.9 48.1 58.3 135.2
WLR
Foods,
Inc. AVERAGE Bantam Heavy
---- ------- ------ -----
FYE JE JE JE
<S> <C> <C> <C> <C>
LTM Period as of: 12/96 12/96 12/96
Total Assets
LTM (1) $398.5 $198.8 $997.8
1996 451.1 164.0 976.0
1995 372.5 155.6 821.6
Total Cash (2)
LTM (1) $0.3 $3.4 $19.6
1996 0.7 2.6 20.6
1995 0.7 2.7 16.6
Current Ratio
LTM (1) 1.9 x 2.6 x 1.9 x 1.5 x
1996 2.2 2.6 2.1 1.5
1995 2.7 2.6 1.8 1.5
Total Debt (3)
LTM (1) $140.8 $25.6 $390.2
1996 177.3 5.4 359.4
1995 114.5 22.7 262.7
Stockholders' Equity
LTM (1) $144.7 $110.6 $331.8
1996 159.0 104.4 326.4
1995 163.3 88.9 315.0
Total Debt/Equity
LTM (1) 97.4 % 103.7 % 23.2 % 117.6 %
1996 111.5 108.6 5.2 110.1
1995 70.1 79.7 25.5 83.4
</TABLE>
_____________________________________________________
(1) For the purposes of comparability, LTM data are derived from the company's
most recent 10-K or 10-Q filing.
(2) Includes cash equivalents and S-T investments.
(3) Preferred stock is included as debt, not equity.
<PAGE>
PROJECT BANTAM
MARKET COMPARISON OF SELECTED PUBLIC COMPANIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HUDSON PILGRIM'S SANDERSON TYSON WLR
CAGLE'S FOODS, PRIDE FARMS, SEABORD FOODS, FOODS,
INC. INC. CORP. INC. CORP. INC. INC. BANTAM HEAVY
--- --- ---- --- ---- --- --- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DEPRECIATION / REVENUES
- -----------------------
LTM 2.0% 1.9% 2.4% 4.3% 3.5% 3.7% 2.8% 2.0% 1.9%
1996 1.7% 1.9% 2.5% 4.3% 3.5% 3.7% 2.8% 2.6% 2.0%
1995 1.3% 2.1% 2.8% 4.7% 3.8% 3.7% 2.7% 3.3% 2.3%
AVERAGE 1.7% 2.0% 2.6% 4.4% 3.6% 3.7% 2.8% 2.6% 2.1%
EBITDA / REVENUES
- -----------------
LTM 1.4% 4.8% 4.9% 6.0% 4.8% 7.7% 0.3% 5.6% 3.7%
1996 2.2% 4.8% 4.3% 4.6% 4.8% 7.9% 3.1% 7.1% 5.5%
1995 6.6% 7.5% 5.5% 10.1% 6.5% 12.3% 6.3% 4.0% 4.3%
ACCUM. DEPR. / DEPRECIATION (AVERAGE ESTIMATED FIXED ASSET AGE IN YEARS)
- ---------------------------
LTM
1996 5.3 5.7 6.5 5.9 4.2 NA NA 8.0 9.2
1995 5.9 5.6 6.4 5.7 4.2 4.6 5.9 6.4 8.8
7.3 5.5 6.1 5.1 3.9 5.0 6.1 5.2 8.5
AVERAGE 6.1 5.6 6.3 5.6 4.1 4.8 6.0 6.5 8.8
NET PP&E / DEPRECIATION (AVERAGE ESTIMATED YEARS OF DEPRECIABLE LIFE REMAINING)
- -----------------------
LTM 9.1 13.4 10.2 8.6 8.6 7.8 5.8 7.2 6.9
1996 12.0 13.8 10.3 8.0 8.6 7.8 6.3 4.8 6.4
1995 7.6 11.0 10.8 7.1 5.7 9.8 7.0 4.7 6.0
AVERAGE 9.6 12.7 10.4 7.9 7.6 8.5 6.4 5.6 6.4
GROSS PP&E / DEPRECIATION (AVERAGE ESTIMATED DEPRECIABLE LIFE)
- -------------------------
LTM
1996 14.4 19.1 16.7 14.5 12.8 NA NA 15.2 16.1
1995 17.9 19.4 16.7 13.7 12.8 12.4 12.2 11.2 15.2
14.9 16.4 16.9 12.3 9.6 14.9 13.2 9.9 14.5
AVERAGE 15.7 18.3 16.8 13.5 11.7 13.7 12.7 12.1 15.2
</TABLE>
<PAGE>
PROJECT BANTAM - LTM ANALYSIS
IMPLIED VALUATION ANALYSIS UTILIZING POULTRY COMPANIES' AVERAGE MULTIPLES
-------------------------------------------------------------------------
(DOLLARS IN THOUSAND)
<TABLE>
<CAPTION>
AVERAGE MULTIPLE
-------------------------------------------------------------------------------
BANTAM PRICE/ PRICE/ PRICE/ MARKET/
VALUATION PARAMETER VALUE LTM NET INCOME CAL. 1997 NET INCOME CAL. 1998 NET INCOME BOOK
- --------------------- -------- ---------------- ---------------------- ---------------------- ----------------
<S> <C> <C> <C> <C> <C>
LTM Net Income $13,451 19.6 x
1997 Net Income 11,529 12.1 x
1998 Net Income 19,258 11.8 x
Book value 110,621 1.6 x
</TABLE>
<TABLE>
AVERAGE MULTIPLE
-------------------------------------------------------------------------------
BANTAM FIRM VALUE (1)/ FIRM VALUE (1)/ FIRM VALUE (1)/ FIRM VALUE (1)/ LESS
VALUATION PARAMETER VALUE LTM REVENUES LTM EBITDA PROJ. EBITDA LTM EBIT NET DEBT (2)
- ----------------------- ---------- --------------- --------------- --------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
LTM Revenues $ 670,075 0.51 x $ 22,240
LTM EBITDA 37,643 10.0 x 22,240
Proj. 1997 EBITA 33.400 6.6 x 22,240
LTM EBIT 24,441 21.6 x 22,240
</TABLE>
<TABLE>
IMPLIED VALUE
EQUITY PER
VALUATION PARAMETER VALUE SHARE (3)
- ----------------------- ------- ---------
<S> <C> <C>
LTM Net Income $263,268 $18.00
1997 Net Income 139,934 9.57
1998 Net Income 227,646 $15.57
Book value 173,129 $11.84
VALUATION PARAMETER
- -----------------------
LTM Revenues $316,198 $21.62
LTM EBITDA 354,093 $24.21
Proj. 1997 EBITA 199,566 $13.65
LTM EBIT 506,513 $34.64
</TABLE>
________________
(1) Firm value equals market capitalization plus total debt and preferred stock
minus cash and marketable securities.
(2) Net Debt equals debt plus preferred stock less cash and marketable
securities.
(3) Calculated using 14.624 million common shares outstanding.
<PAGE>
PROJECT BANTAM
DCF MODEL ASSUMPTIONS
- --------------------------------------------------------------------------------
. Plant capacity projections at the Sumter Plant exceed rated capacity due to
additional capacity from the further processing of dressed poultry products
purchased from other chicken processors. Additionally, in calculating the
Net Pretax Income, the Sumter plant capacity is adjusted to reflect only 51%
of the Joint Venture.
. Projections for margins on yield reflect: historical experience, the
Russellville plant's cost plus contract, and the profitability of various
processed chicken products.
. Net sales exceed the product of yield pounds and revenue per pound due to
management's inclusion of intra-company transfers in the net revenue numbers.
. Pretax margins calculated using cents per lb. profit of 2.0, 3.2, 3.5, 3.7
and 4.0 for 1997-2001 respectively.
. Capacity pounds based on steady live weight of 5.73 lbs. per bird after 1997.
. Interest expense does not include capitalized interest numbers.
. Projections for interest expense reflect a relatively low cost of debt (7.5%)
due to the Company's use of industrial development bonds.
. Capital expenditures of $60 million for 1997 include: the expansion of the
Russellville plant, the Siler City addition to the Sanford plant, and various
routine maintenance improvements. The forward looking numbers reflect annual
efficiency improvements for the plants ranging from $10-$20 million over the
remaining forecast period.
. Projected income taxes remain in line with Fiscal 1996 effective rate of 37%.
. Terminal value multiples for EBIT and EBITDA reflect a discount to the
current multiples of comparable companies, reflecting a conservative
estimate given Bantam's future growth and profitability characteristics. The
model looks at a range of terminal EBIT and EBITDA multiples of 6.5x-9.5x and
4.5x-7.5x, respectively, at discount rates ranging from 11% to 16%.
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
PROJECTED CASH FLOWS
FORECAST FOR FISCAL YEARS 1997 - 2001
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROJECTIONS USED IN VALUATION (DOLLARS IN THOUSANDS): 1997 1998 1999 2000 2001
- ----------------------------------------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Sales $755,122 $819,345 $873,288 $895,473 $919,662
Percent Change 8.5% 6.6% 2.5% 2.7%
Cost of Goods Sold and Operating Expenses 735,722 785,234 835,414 857,720 879,352
----------- ----------- ----------- ----------- -----------
Operating Income 19,400 34,111 37,874 37,753 40,310
Operating Margin 2.6% 4.2% 4.3% 4.2% 4.4%
Income Taxes 7,178 12,621 14,013 13,969 14,915
----------- ----------- ----------- ----------- -----------
Effective Tax Rate 37.0% 37.0% 37.0% 37.0% 37.0%
After-Tax Operating Income $12,222 $21,490 $23,861 $23,784 $25,395
After-Tax Operating Margin 1.6% 2.6% 2.7% 2.7% 2.8%
CASH SOURCES:
After-Tax Operating Income $12,222 $21,490 $23,861 $23,784 $25,395
Depreciation & Amortization 14,000 15,500 14,500 14,500 14,500
Other Cash Sources 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
TOTAL SOURCES $26,222 $36,990 $38,361 $38,284 $39,895
=========== =========== =========== =========== ===========
CASH USES:
Capital Expenditures $60,000 $20,000 $10,000 $10,000 $10,000
Acquisitions 0 0 0 0 0
Increase/(Decrease) in Net Working Capital 3,735 6,000 3,000 4,300 3,200
Dividends Paid 0 0 0 0 0
----------- ----------- ----------- ----------- -----------
TOTAL USES $63,735 $26,000 $13,000 $14,300 $13,200
=========== =========== =========== =========== ===========
FREE CASH FLOW ($37,513) $10,990 $25,361 $23,984 $26,695
</TABLE>
- --------------------------------------------------------------------------------
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
COST AND REVENUE ASSUMPTIONS
HISTORICAL DATA AND FORECAST FOR FISCAL YEARS 1997-2001
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
COST AND REVENUE PER POUND OF CHICKEN
- -------------------------------------
Total Production Cost 0.27 0.26 0.27 0.32 0.33 0.34 0.35 0.36
Bankable Yield (1) 74% 74% 77% 78% 78% 78% 78% 78%
Adjusted Meat Cost (2) 0.37 0.34 0.35 0.40 0.41 0.42 0.43 0.45
Expense from All Operations (3) 0.17 0.17 0.17 0.13 0.14 0.14 0.15 0.15
----- ----- ----- ----- ----- ----- ----- -----
Total Product Cost and Expense 0.54 0.51 0.52 0.53 0.55 0.56 0.58 0.60
Total Product Revenues 0.54 0.52 0.55 0.55 0.58 0.60 0.62 0.64
----- ----- ----- ----- ----- ----- ----- -----
Net Pretax Margin on Yields 0.009 0.005 0.033 0.020 0.032 0.035 0.037 0.040
====================================================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
INCOME STATEMENT
- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales (4) 447,139 505,975 600,237 755,122 819,345 873,288 895,473 919,662
Net Pretax Income (in 000s) (5) 5,724 3,879 25,567 18,300 30,569 35,467 37,281 40,310
====================================================================================================================
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
CASH FLOW ITEMS
- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Expense (6) 1,311 1,703 1,459 1,100 3,543 2,407 472 0
Depreciation and Amortization 16,411 16,905 15,499 14,000 15,500 14,500 14,500 14,500
Capital Expenditures 21,544 8,893 12,379 60,000 20,000 10,000 10,000 10,000
====================================================================================================================
</TABLE>
(1) Salable % of live weight
(2) Includes Offal credits
(3) Includes all Allocations (Depreciation, Interest, etc.)
(4) Includes intra-Company transfers
(5) Includes only 51% of Joint Venture at Sumter Plant
(6) Does not include Capitalized Interest
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
PROCESSING PLANT CAPACITY ASSUMPTIONS
HISTORICAL DATA AND FORECAST FOR FISCAL YEARS 1997 - 2001
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ----
- ------------------------------------------------------------------------------------------------------------------------------------
CHICKEN PRODUCTION CAPACITY (IN 000S OF CHICKENS)
- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas Plant 962 /wk 1,250 /wk 1,250 /wk 1,250 /wk 1,250 /wk 1,250 /wk 1,250 /wk 1,250 /wk
Sanford Plant 830 /wk 830 /wk 830 /wk 1,470 /wk 1,470 /wk 1,470 /wk 1,470 /wk 1,470 /wk
Russellville Plant 830 /wk 830 /wk 830 /wk 830 /wk 1,000 /wk 1,250 /wk 1,250 /wk 1,250 /wk
Sumter Plant (1) 1,078 /wk 1,280 /wk 1,280 /wk 1,477 /wk 1,477 /wk 1,477 /wk 1,477 /wk 1,477 /wk
-------- -------- -------- -------- -------- -------- -------- --------
Weekly Total 3,700 /wk 4,190 /wk 4,190 /wk 5,027 /wk 5,197 /wk 5,447 /wk 5,447 /wk 5,447 /wk
-------- -------- -------- -------- -------- -------- -------- --------
Total Annual Capacity (2) 185,000 /yr 209,500 /yr 209,500 /yr 251,350 /yr 259,850 /yr 272,350 /yr 272,350 /yr 272,350 /yr
Plant Efficiency 97.1% 100.0% 96.0% 95.0% 95.0% 95.0% 95.0% 95.0%
Annual Yield (3) 179,713 209,440 201,080 238,783 246,858 258,733 258,733 258,733
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
POUNDS OF CHICKEN CAPACITY (IN 0OOS OF LBS.)
- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Avg Live Weight (in lbs.) 4.80 4.90 5.32 5.60 5.73 5.73 5.73 5.73
Bankable Yield (4) 73.9% 73.7% 77.4% 78.2% 78.2% 78.2% 78.2% 78.2%
Yield lbs. 637,478 756,351 827,983 1,045,676 1,106,134 1,159,344 1,159,344 1,159,344
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes additional capacity from the further processing of dressed poultry
products
(2) Assumes 50 week year
(3) Corrects for Plant Efficiency
(4) Salable % of Live Weight
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
WORKING CAPITAL ASSUMPTIONS
FORECAST FOR FISCAL YEARS 1997 - 2001
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
BALANCE SHEET DATA 1996 1997 1998 1999 2000 2001
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current Assets less Cash and Equivalents
Accounts Receivable $23,654 $28,000 $31,000 $33,000 $34,300 $35,500
Inventory 54,903 63,000 68,000 71,000 75,000 79,000
Other Current Assets 2,468 2,468 2,468 2,468 2,468 2,468
--------- --------- --------- --------- --------- ---------
81,025 93,468 101,468 106,468 111,768 116,968
Current Liabilities less Current Debt
Accounts Payable $26,292 $35,000 $37,000 $39,000 $40,000 $42,000
Accrued Expenses 8,300 8,300 8,300 8,300 8,300 8,300
Income taxes payable 2,705 2,705 2,705 2,705 2,705 2,705
--------- --------- --------- --------- --------- ---------
37,297 46,005 48,005 50,005 51,005 53,005
Working Capital Less Cash and Equivalents and Current Debt $43,728 $47,463 $53,463 $56,463 $60,763 $63,963
---------------------------------------------------------------------------------------------------------------
CHANGE IN NET WORKING CAPITAL $3,735 $6,000 $3,000 $4,300 $3,200
---------------------------------------------------------------------------------------------------------------
</TABLE>
ASSUMPTIONS
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Accounts Receivable as a % of Sales 3.9% 3.7% 3.8% 3.8% 3.8% 3.9%
Days Receivable 14.4 13.5 13.8 13.8 14.0 14.1
Inventory as a % of Cost of Goods Sold 9.9% 8.6% 8.7% 8.5% 8.7% 9.0%
Inventory Turns 10.1 11.7 11.5 11.8 11.4 11.1
Other Current Assets as a % of Sales 0.4% 0.3% 0.3% 0.3% 0.3% 0.3%
Accounts Payable as a % of Cost of Goods Sold 4.8% 4.8% 4.7% 4.7% 4.7% 4.8%
Days Payable 17.4 17.4 17.2 17.0 17.0 17.4
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
TERMINAL FREE CASH FLOW METHODOLOGY
FORECAST FOR FISCAL YEARS 1997-2001
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------
SUMMARY:
- ---------------------------------------------
<S> <C>
WACC: 13.00%
Terminal Growth Rate 4.00%
Present Value of Cash Flows: $24,314
Present Value of Terminal Value: $183,501
----------
Total Value: $207,816
==========
Plus: Cash $2,599
Less: Debt $5,425
----------
Equity Value: $204,990
==========
EQUITY VALUE PER SHARE: $14.02
- ---------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital(WACC) 11.00% 12.00% 13.00% 14.00% 15.00% 16.00%
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $ 27,370 $ 25,812 $ 24,314 $ 22,874 $ 21,489 $ 20,156
- ----------------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
3.0% $220,575 $188,734 $163,563 $143,229 $126,509 $112,559
3.5% $236,422 $200,806 $173,007 $150,778 $132,650 $117,629
Growth Rate: 4.0% $254,533 $214,387 $183,501 $159,081 $139,350 $123,122
4.5% $275,430 $229,779 $195,229 $168,259 $146,687 $129,093
5.0% $299,810 $247,369 $208,424 $178,457 $154,759 $135,607
- ----------------------------------------------------------------------------------------------------------------
Total Value:
3.0% $247,945 $214,546 $187,878 $166,103 $147,998 $132,714
3.5% $263,792 $226,618 $197,322 $173,652 $154,139 $137,785
Growth Rate: 4.0% $281,903 $240,199 $207,816 $181,956 $160,839 $143,278
4.5% $302,800 $255,591 $219,544 $191,133 $168,176 $149,249
5.0% $327,180 $273,181 $232,738 $201,331 $176,248 $155,762
- ----------------------------------------------------------------------------------------------------------------
Equity Value:
3.0% $245,119 $211,720 $185,052 $163,277 $145,172 $129,888
3.5% $260,966 $223,792 $194,496 $170,826 $151,313 $134,959
Growth Rate 4.0% $279,077 $237,373 $204,990 $179,130 $158,013 $140,452
4.5% $299,974 $252,765 $216,718 $188,307 $165,350 $146,423
5.0% $324,354 $270,355 $229,912 $198,505 $173,422 $152,936
- ----------------------------------------------------------------------------------------------------------------
Equity Value Per Share:
3.0% $16.76 $14.48 $12.65 $11.17 $9.93 $8.88
3.5% $17.85 $15.30 $13.30 $11.68 $10.35 $9.23
Growth Rate: 4.0% $19.08 $16.23 $14.02 $12.25 $10.81 $9.60
4.5% $20.51 $17.28 $14.82 $12.88 $11.31 $10.01
5.0% $22.18 $18.49 $15.72 $13.57 $11.86 $10.46
- ----------------------------------------------------------------------------------------------------------------
Implied Total Value/Fiscal 1996 EBIT Multiple:
3.0% 12.5 x 10.8 x 9.5 x 8.4 x 7.5 x 6.7 x
3.5% 13.3 11.4 9.9 8.7 7.8 6.9
Growth Rate: 4.0% 14.2 12.1 10.5 9.2 8.1 7.2
4.5% 15.3 12.9 11.1 9.6 8.5 7.5
5.0% 16.5 13.8 11.7 10.1 8.9 7.8
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROJECT BANTAM
EBIT MULTIPLE METHODOLOGY
FORECAST FOR FISCAL YEARS 1997-2001
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------
SUMMARY:
- -----------------------------------------------
<S> <C>
WACC: 13.00%
Multiple: 8.0
EBIT Terminal Value: $40,310
Present Value of Cash Flows: $24,314
Present Value of Terminal Value: $191,830
---------
Total Value: $216,144
=========
Plus: Cash $2,599
Less: Debt $5,425
---------
Equity Value $213,318
=========
Equity Value Per Share: $14.59
- -----------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 11.00% 12.00% 13.00% 14.00% 15.00% 16.00%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $27,370 $25,812 $24,314 $22,874 $21,489 $20,156
- -------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
6.5 x $168,151 $161,862 $155,862 $150,133 $144,663 $139,436
7.0 $181,086 $174,313 $167,851 $161,682 $155,791 $150,162
7.5 $194,021 $186,764 $179,840 $173,231 $166,919 $160,888
Multiple 8.0 $206,955 $199,215 $191,830 $184,779 $178,046 $171,614
8.5 $219,890 $211,666 $203,819 $196,328 $189,174 $182,340
9.0 $232,825 $224,117 $215,808 $207,877 $200,302 $193,066
9.5 $245,759 $236,568 $227,798 $219,426 $211,430 $203,792
- -------------------------------------------------------------------------------------------------------
Total Value:
6.5 x $195,521 $187,674 $180,176 $173,008 $166,152 $159,592
7.0 $208,456 $200,125 $192,165 $184,556 $177,280 $170,318
7.5 $221,390 $212,576 $204,155 $196,105 $188,408 $181,044
Multiple 8.0 $234,325 $225,027 $216,144 $207,654 $199,535 $191,770
8.5 $247,260 $237,478 $228,134 $219,202 $210,663 $202,496
9.0 $260,195 $249,929 $240,123 $230,751 $221,791 $213,221
9.5 $273,129 $262,380 $252,112 $242,300 $232,919 $223,947
- -------------------------------------------------------------------------------------------------------
Equity Value
6.5 x $192,695 $184,848 $177,350 $170,182 $163,326 $156,766
7.0 $205,630 $197,299 $189,339 $181,730 $174,454 $167,492
7.5 $218,564 $209,750 $201,329 $193,279 $185,582 $178,218
Multiple 8.0 $231,499 $222,201 $213,318 $204,828 $196,709 $188,944
8.5 $244,434 $234,652 $225,308 $216,376 $207,837 $199,670
9.0 $257,369 $247,103 $237,297 $227,925 $218,965 $210,395
9.5 $270,303 $259,554 $249,286 $239,474 $230,093 $221,121
- -------------------------------------------------------------------------------------------------------
Equity Value Per Share:
6.5 x $13.18 $12.64 $12.13 $11.64 $11.17 $10.72
7.0 $14.06 $13.49 $12.95 $12.43 $11.93 $11.45
7.5 $14.95 $14.34 $13.77 $13.22 $12.69 $12.19
Multiple 8.0 $15.83 $15.19 $14.59 $14.01 $13.45 $12.92
8.5 $16.71 $16.05 $15.41 $14.80 $14.21 $13.65
9.0 $17.60 $16.90 $16.23 $15.59 $14.97 $14.39
9.5 $18.48 $17.75 $17.05 $16.38 $15.73 $15.12
- -------------------------------------------------------------------------------------------------------
Implied Total Value/Fiscal 1996 EBIT Multiple:
6.5 x 9.8 x 9.5 x 9.1 x 8.7 x 8.4 x 8.0 x
7.0 10.5 10.1 9.7 9.3 8.9 8.6
7.5 11.2 10.7 10.3 9.9 9.5 9.1
Multiple 8.0 11.8 11.3 10.9 10.5 10.1 9.7
8.5 12.5 12.0 11.5 11.0 10.6 10.2
9.0 13.1 12.6 12.1 11.6 11.2 10.7
9.5 13.8 13.2 12.7 12.2 11.7 11.3
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PROJECT BANTAM
EBITDA MULTIPLE METHODOLOGY
FORECAST FOR FISCAL YEARS 1997-2001
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- -----------------------------------------------
SUMMARY:
- -----------------------------------------------
<S> <C>
WACC: 13.00%
Multiple: $6.0
EBITDA Terminal Value: $54,810
Present Value of Cash Flows: $24,314
Present Value of Terminal Value: $195,625
---------
Total Value: $219,940
=========
Plus: Cash $2,599
Less: Debt $5,425
---------
Equity Value $217,114
=========
EQUITY VALUE PER SHARE: $14.85
- -----------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Weighted Average Cost of Capital (WACC) 11.00% 12.00% 13.00% 14.00% 15.00% 16.00%
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Present Value of Cash Flows: $27,370 $25,812 $24,314 $22,874 $21,489 $20,156
- -------------------------------------------------------------------------------------------------------
Present Value of Terminal Value:
4.5 x $158,288 $152,368 $146,719 $141,327 $136,177 $131,257
5.0 $175,875 $169,298 $163,021 $157,030 $151,308 $145,841
5.5 $193,463 $186,227 $179,323 $172,733 $166,439 $160,426
Multiple 6.0 $211,050 $203,157 $195,625 $188,436 $181,569 $175,010
6.5 $228,638 $220,087 $211,927 $204,138 $196,700 $189,594
7.0 $246,225 $237,017 $228,230 $219,841 $211,831 $204,178
7.5 $263,813 $253,946 $244,532 $235,544 $226,962 $218,762
- -------------------------------------------------------------------------------------------------------
Total Value:
4.5 x $185,658 $178,180 $171,033 $164,201 $157,666 $151,413
5.0 $203,245 $195,110 $187,336 $179,904 $172,797 $165,997
5.5 $220,833 $212,039 $203,638 $195,607 $187,928 $180,581
Multiple 6.0 $238,420 $228,969 $219,940 $211,310 $203,058 $195,165
6.5 $256,008 $245,899 $236,242 $227,013 $218,189 $209,749
7.0 $273,595 $262,829 $252,544 $242,716 $233,320 $224,334
7.5 $291,183 $279,758 $268,846 $258,419 $248,451 $238,918
- -------------------------------------------------------------------------------------------------------
Equity Value
4.5 x $182,832 $175,354 $168,207 $161,375 $154,840 $148,587
5.0 $200,419 $192,284 $184,510 $177,078 $169,971 $163,171
5.5 $218,007 $209,213 $200,812 $192,781 $185,102 $177,755
Multiple 6.0 $235,594 $226,143 $217,114 $208,484 $200,232 $192,339
6.5 $253,182 $243,073 $233,416 $224,187 $215,363 $206,923
7.0 $270,769 $260,003 $249,718 $239,890 $230,494 $221,508
7.5 $288,357 $276,932 $266,020 $255,593 $245,625 $236,092
- -------------------------------------------------------------------------------------------------------
Equity Value Per Share:
4.5 x $12.50 $11.99 $11.50 $11.03 $10.59 $10.16
5.0 $13.70 $13.15 $12.62 $12.11 $11.62 $11.16
5.5 $14.91 $14.31 $13.73 $13.18 $12.66 $12.16
Multiple 6.0 $16.11 $15.46 $14.85 $14.26 $13.69 $13.15
6.5 $17.31 $16.62 $15.96 $15.33 $14.73 $14.15
7.0 $18.52 $17.78 $17.08 $16.40 $15.76 $15.15
7.5 $19.72 $18.94 $18.19 $17.48 $16.80 $16.14
- -------------------------------------------------------------------------------------------------------
Implied Total Value/Fiscal 1996 EBITDA Multiple:
4.5 x 5.3 x 5.0 x 4.8 x 4.6 x 4.5 x 4.3 x
5.0 5.7 5.5 5.3 5.1 4.9 4.7
5.5 6.2 6.0 5.8 5.5 5.3 5.1
Multiple 6.0 6.7 6.5 6.2 6.0 5.7 5.5
6.5 7.2 7.0 6.7 6.4 6.2 5.9
7.0 7.7 7.4 7.1 6.9 6.6 6.3
7.5 8.2 7.9 7.6 7.3 7.0 6.8
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
DISCOUNTED CASH FLOW ANALYSIS
FORECAST FOR FISCAL YEARS 1997 - 2001
<TABLE>
<CAPTION>
WEIGHTED AVERAGE COST OF CAPITAL ANALYSIS:
- ------------------------------------------
<S> <C>
COST OF EQUITY
- --------------------------------------------------------------------------------
Beta Risk Factor 1.03 (1)
Market Risk Premium for Equity 6.00%
Current Yield of 30 Year Treasury Bond (4/18/97) 7.07%
===========================================================================
COST OF EQUITY 13.23%(2)
===========================================================================
COST OF DEBT
- --------------------------------------------------------------------------------
Pre-tax Cost of Debt 7.50% (3)
Corporate Tax Rate 37.00% (4)
===========================================================================
AFTER-TAX COST OF DEBT 4.73%
===========================================================================
WEIGHTED AVERAGE COST OF CAPITAL
- --------------------------------------------------------------------------------
Cost of Equity 13.23%
After-tax Cost of Debt 4.73%
Total Funded Debt ($000) $5,425 (5)
Stockholders' Equity ($000) $104,357 (5)
Market Capitalization ($000) $191,940
Debt/Market Capitalization 2.83%
Debt/Total Capital 2.75%
===========================================================================
WEIGHTED AVERAGE COST OF CAPITAL 13.00%
===========================================================================
===========================================================================
WEIGHTED AVERAGE COST OF CAPITAL
===========================================================================
MIDPOINT 13.00%
===========================================================================
===========================================================================
CAPITALIZATION
===========================================================================
Debt/Total Capital Equity/Total Capital Debt/Market Equity
- ------------------ -------------------- ------------------
2.75% 97.25% 2.83%
===========================================================================
===========================================================================
BETA SENSITIVITY ANALYSIS
===========================================================================
ASSUMED BETA COST OF EQUITY WACC
- ------------ -------------- ----
0.93 12.63% 12.42%
0.98 12.93% 12.71%
1.03 13.23% 13.00%
1.08 13.53% 13.29%
1.13 13.83% 13.58%
===========================================================================
</TABLE>
____________________________
(1) Utilizes beta value for Tyson Foods from AT Financial Information, Inc. to
approximate future beta for Bantam.
(2) Cost of Equity equals the rate of return on the 30 year Treasury Bond +
(Beta * Market Risk Premium).
(3) The Company's incremental debt cost assumed to be approximately 7.5%.
(4) Represents the effective tax rate projected for 1997.
(5) Total Debt and Shareholders' Equity as of June 29, 1996.
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
SELECTED M&A TRANSACTION PREMIUMS FOR MINORITY INTEREST ACQUISITIONS IN GOING
PRIVATE TRANSACTIONS 1/1/92 - 4/16/97
<TABLE>
<CAPTION>
Value
Transaction
Date Acquiror Target Target Business Description ($MM)
- ---- -------- ------ --------------------------- -----
<S> <C> <C> <C> <C>
06/25/92 Katy Holding Katy Industries Inc Mnfr industrial machinery 190.047
07/29/92 Investor Group Fretter Inc Home appliances, electronics 102.182
01/04/93 Investor Group United Medical Corp Whl medical supplies 19.473
02/19/93 National Mutual Insurance Co Celina Financial Corp Insurance agents 7.482
08/12/93 REMEC Inc. Humphrey Inc Mnfr precision instruments 10.302
04/28/94 Investor Group Enquirer/Star Group Inc Publish tabloid newspapers 1067.888
09/13/94 Investor Group LDB Corp Mnfr mobile homes; whl carpets 17.766
11/15/94 Freeman Spogli & Co Koll Management Services(Koll) Real estate management svcs 109.062
03/15/95 LinPac Mouldings Ltd Ropak Corp Manufacture plastic containers 79.638
05/19/95 BIC SA Bic Corp(BIC SA) Mnfr writing instruments 906.058
08/25/95 Berkshire Hathaway Inc. GEICO Corp. Insurance and financial svcs 5441.824
08/30/95 Investor Group Syms Corp Own,op men's clothing store 160.687
09/26/95 SCOR SCOR US Corp(SCOR SA) Reinsurance holding company 386.745
11/06/95 Investor Group NPC International Inc Own and operate restaurants 298.189
03/29/96 Equity Holdings Ltd Great American Mgmt & Invt Inc Invt advice and financial svcs 746.409
05/27/96 Novartis AG SyStemix Inc(Sandoz AG) Mnfr, dvlp cellular processes 401.596
06/21/96 Seaboard Acquisition Partners Seaboard Oil Co Oil and gas exploration, prodn 10.769
10/03/96 Electromagnetic Sciences LXE Radio control devices 13.500
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) Manufacture steel 437.182
11/20/96 Andrews Group Inc Toy Biz Inc Mnfr games and toys 452.237
11/27/96 JW Childs Equity Partners LP Central Tractor Farm & Country Own, op tractor, hardware stores 169.606
01/21/97 Mafco Holdings Inc Mafco Consolidated Grp(Mafco) Mnfr cosmetics, beauty products 980.318
<CAPTION>
Premium Premium Premium
1 Day 1 Weeks 4 Weeks
Price Prior To Prior To Prior To
Percent Per Announcement Announcement Announcement
Date Sought Share Date Date Date
- ---- ------ ----- ---- ---- ----
<S> <C> <C> <C> <C> <C>
06/25/92 48.1% 25.75 53.7 % 51.5 % 46.1 %
07/29/92 24.0% 4.00 77.8 100.0 52.4
01/04/93 48.0% 9.50 49.0 52.0 49.0
02/19/93 44.4% 5.80 16.0 36.5 36.5
08/12/93 48.5% 6.00 18.5 14.3 45.5
04/28/94 43.0% 17.50 20.7 20.7 7.7
09/13/94 31.0% 7.50 42.9 42.9 42.9
11/15/94 48.0% 33.20 107.5 107.5 114.2
03/15/95 45.2% 11.00 4.8 6.0 4.8
05/19/95 22.0% 40.50 13.3 12.5 28.6
08/25/95 47.6% 70.00 25.6 23.1 25.3
08/30/95 22.0% 8.75 11.1 9.4 25.0
09/26/95 20.0% 15.25 37.1 35.6 38.6
11/06/95 38.0% 9.00 44.0 44.0 33.3
03/29/96 12.1% 50.00 2.6 4.2 3.6
05/27/96 26.3% 19.50 4.7 69.6 59.2
06/21/96 29.0% 9.75 11.4 11.4 39.3
10/03/96 28.0% 13.13 22.1 14.1 19.3
10/10/96 15.5% 10.00 17.6 29.0 77.8
11/20/96 33.0% 22.50 29.5 25.9 20.0
11/27/96 34.6% 14.25 17.5 17.5 18.8
01/21/97 15.0% 33.50 23.5 23.5 27.6
AVERAGE 32.9% 29.6 34.1 37.1 %
MEDIAN 32.0% 21.4 24.7 34.9 %
===================================================================================
</TABLE>
Source: Securities Data Company, Inc.
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
IMPLIED VALUATION ANALYSIS UTILIZING SELECTED PREMIUMS FROM MINORITY
--------------------------------------------------------------------
INTEREST/GOING PRIVATE TRANSACTIONS
-----------------------------------
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MEDIAN PREMIUM
-----------------------------------
BANTAM IMPORTANCE 1 DAY PRIOR 1 WEEK PRIOR
VALUATION PARAMETER [1] VALUE WEIGHTING TO ANNOUNCEMENT TO ANNOUNCEMENT
- --------------------------------------- --------- --------- --------------- -----------------
<S> <C> <C> <C> <C>
Stock Price 1 Day Prior to Announcement $11.13 35.0% 21.4 %
Stock Price 1 Week Prior to Announcement 10.88 35.0% 24.7 %
Stock Price 4 Weeks Prior to Announcement 11.00 30.0%
<CAPTION>
IMPLIED
EQUITY
MEDIAN PREMIUM IMPLIED VALUE
-----------------
4 WEEKS PRIOR EQUITY PER
VALUATION PARAMETER [1] TO ANNOUNCEMENT VALUE SHARE [1]
- --------------------------------------- ----------------- ----- ---------
<S> <C> <C> <C>
Stock Price 1 Day Prior to Announcement $197,506 $13.51
Stock Price 1 Week Prior to Announcement 198,315 13.56
Stock Price 4 Weeks Prior to Announcement 34.9 % 217,003 14.84
-------- --------
----------------------------------------
WEIGHTED AVERAGE: $203,638 $13.93
UNWEIGHTED AVERAGE: $204,275 $13.97
----------------------------------------
</TABLE>
_______________________________________
* Excluded from the unweighted average.
[1] Announcement of merger discussions occurred on 1/23/97.
<PAGE>
PROJECT BANTAM
Adjusted Book Value Analysis
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INPUTS
=============================================================================
<S> <C> <C> <C>
12/31/96 Book Value $110,621 1/27/96 Shares 14,624
12/31/96 Accumulated
Depreciation $105,216
=============================================================================
</TABLE>
<TABLE>
<CAPTION>
Percent of Accumulated Depreciation Added Back
----------------------------------------------------------
50.0% 60.0% 70.0% 80.0% 90.0% 100.0%
----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
12/31/96 Book Value $110,621 $110,621 $110,621 $110,621 $110,621 $110,621
Depreciation Add-Back 52,608 63,130 73,651 84,173 94,694 105,216
----------------------------------------------------------
Adjusted Book Value $163,229 $173,751 $184,272 $194,794 $205,315 $215,837
==========================================================
Adjusted B.V. per Share $11.16 $11.88 $12.60 $13.32 $14.04 $14.76
==========================================================
</TABLE>
<PAGE>
The Robinson-Humphrey Company, Inc.
PROJECT BANTAM
VALUATION ANALYSIS USING LIVE CHICKEN CAPACITY HEADS PER WEEK
- --------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
GOLDEN POULTRY PLANT PURCHASES/ADDITIONS Heads/Wk $/
- ----------------------------------------
$MM 000s Head
---------- ---------- ----------
<S> <C> <C> <C>
Russellville (Addition) $35.0 400 $87.50
Russellville (Original Purchase) $33.5 830 $40.36
Sumter $55.0 1,000 $55.00
Siler City (Distress Sale from Perdue) $22.0 640 $34.38
Douglas Bid to Campbell Soup (Lost to CPC) $53.0 638 $83.07
----------
---------------------------------------
AVERAGE $60.06
---------------------------------------
<CAPTION>
OTHER TRANSACTIONS Heads/Wk $/
- ------------------
$MM 000s Head
---------- ---------- ----------
<S> <C> <C> <C>
Tyson's Purchase of Cargill/McCarty Farms $320.6 4,990 $64.26
Hudson Investment in Henderson, KY Plant $130.0 2,300 $56.52
Sanderson Farms Investment in New Plant $77.0 1,250 $61.60
---------------------------------------
OVERALL AVERAGE $60.34
OVERALL MEDIAN $56.52
---------------------------------------
</TABLE>
IMPLIED VALUATION USING AVERAGE AND MEDIAN $MM/HEAD
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
BANTAM
HEADS/WK $/ FIRM NET EQUITY PER
000S X HEAD = VALUE - DEBT = VALUE OR SHARE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4,200 $60.34 $253,411 $22,240 $231,171 $15.81
4,200 $56.52 $237,391 $22,240 $215,151 $14.71
- -----------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT (b)(4)
SUNTRUST CAPITAL MARKETS, INC.
GOLD KIST INC.
________________________________________________________________________________
TABLE OF CONTENTS
I. Proxy Statement
II. Golden Poultry Form 10-Q and 10-K
III. Premium Analysis
IV. Minority Interest Acquisition Premiums
V. Tender Offer Premiums
VI. Replacement Cost Valuation
VII. Capacity Valuation
VIII. Comparison to Publicly Traded Companies
IX. Comparable M&A Transactions
X. Discounted Cash Flow Valuation
_______________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
<PAGE>
Golden Poultry Company, Inc.
Proxy Statement
July __, 1997
{Incorporated by Reference}
<PAGE>
Golden Poultry Company, Inc.
Form 10-Q
December 28, 1996
{Incorporated by Reference}
<PAGE>
Golden Poultry Company, Inc.
Form 10-Q
September 28, 1996
{Incorporated by Reference}
<PAGE>
Golden Poultry Company, Inc.
Form 10-K
June 29, 1996
{Incorporated by Reference}
<PAGE>
Golden Poultry Company, Inc.
Form 10-K
July 1, 1995
{Incorporated by Reference}
<PAGE>
Golden Poultry Company, Inc.
Form 10-K
June 25, 1994
{Incorporated by Reference}
<PAGE>
Golden Poultry Company, Inc.
Form 10-K
June 26, 1993
{Incorporated by Reference}
<PAGE>
Golden Poultry Company, Inc.
Form 10-K
June 27, 1992
{Incorporated by Reference}
<PAGE>
GOLD KIST INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
OFFER PRICE PREMIUM ANALYSIS (1)
Premium Based on Golden Poultry Stock Price
---------------------------------------------------------
1 Day Prior 5 Days Prior 30 Days Prior
----------- ------------ -------------
<S> <C> <C> <C>
Filing of 13D (2) 35.7% 31.0% 53.0%
Announcement of Agreement in Principle (3) 18.8% 21.3% 16.3%
</TABLE>
Notes:
(1) Based on Gold Kist Inc.'s offer of $14.25 per share for Golden Poultry.
(2) Filing of 13D occurred on January 23, 1997.
(3) Announcement of agreement in principle made on April 11, 1997.
- -------------------------------------------------------------------------------
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
<PAGE>
GOLD KIST INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINORITY INTEREST ACQUISITION INFORMATION
Transactions Announced Between January 1, 1995 and February 28, 1997
Base Equity
Date Percent Percent Price P/E Market 5 Day 30 Day
Buyer Seller Announced Sought Owned (In $ millions) Offered To Book Premium% Premium%
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AmeriQuest Technologies Robec Inc. 24-Aug-95 49.80 50.10 $ 31.25 N/A N/A 42.78 100.72
Inc.
Berkshire Hathaway Inc. GEICO Corp. 28-Aug-95 49.00 51.00 2,300.00 20.70 3.00 23.89 26.40
National Patient Develop. General 25-Sep-96 48.00 52.00 23.84 18.57 2.53 21.90 39.94
Corp Physics Corp.
Gambro A.B. Rem Corp. USA 14-Jul-95 47.00 53.00 190.00 37.70 8.20 20.34 39.18
Private Group CUSTOMEDIX 05-Feb-96 45.40 54.60 2.83 8.43 N/A 3.19 7.18
Monsanto Co. Calgene Inc. 28-Jan-97 45.40 54.60 215.92 (4.55) 10.50 45.00 45.00
American Home Products Corp Immunex Corp. 03-Nov-96 45.40 54.60 263.00 (39.20) 4.00 17.12 3.57
American Financial Corp. American 17-Dec-96 40.50 59.60 798.50 13.40 1.28 0.00 18.36
Property &
Casualty
Cos. Inc.
Terra Industries, Inc. Terra 28-Jun-95 40.00 60.00 228.00 5.50 2.80 13.27 9.56
Nitrogen Co.
L.P.
American Home Products Corp Genetics 17-Dec-96 40.00 60.00 1,250.00 282.29 6.09 36.00 32.30
Institute
Conseco Inc. Bankers Life 27-Feb-95 39.60 60.40 461.01 8.80 3.00 23.94 4.76
Holding Corp.
Private Group NPC 07-Nov-95 38.00 62.00 85.50 (15.50) 10.10 38.46 30.81
International
Inc.
Sears Roebuck & Co. MaxServ Inc. 23-Jan-97 36.00 64.00 39.91 57.35 6.82 14.81 8.70
Genzyme Corp. IG 18-Feb-95 31.00 69.00 21.00 (18.80) N/A 93.77 138.33
Laboratories
Inc.
Seaboard Acquisition Seaboard Oil 21-Jun-96 29.00 71.00 4.06 8.99 1.00 27.78 44.44
Partners Inc Co.
Novarits AG Systemix Inc. 13-Jan-97 26.80 73.20 75.90 (6.96) 3.97 31.00 28.93
Bic S.A. Bic Corp. 23-Jun-95 22.00 78.00 219.00 18.00 N/A 12.10 28.57
Scor S.A. Scor US Corp. 22-Dec-95 20.00 80.00 53.00 16.30 1.00 (1.64) (3.23)
Private Group Syms Corp. 31-Aug-95 20.00 80.00 34.00 18.80 0.80 9.38 25.00
Remco Group Inc. WCI Steel 10-Oct-96 16.00 84.00 58.61 115.98 11.32 29.03 90.44
Inc.
Equity Holdings Ltd. Great 29-Mar-96 12.00 88.00 55.60 12.56 N/A 7.53 11.11
American
Mgmt. &
Investment
Inc.
Grand Casinos Inc. Stratosphere 23-Mar-95 10.00 51.00 33.60 N/A N/A 123.40 94.26
Corp.
Price
30 Day Per Share
Buyer Seller Price Offered
<S> <C> <C> <C>
AmeriQuest Technologies Robec Inc. $ 1.38 $ 2.77
Inc.
Berkshire Hathaway Inc. GEICO Corp. 55.38 70.00
National Patient Develop. General
Corp Physics Corp. 3.38 4.73
Gambro A.B. Rem Corp. USA 14.37 20.00
Private Group CUSTOMEDIX 1.81 1.94
Monsanto Co. Calgene Inc. 5.00 7.25
American Home Products Corp Immunex Corp. 14.00 14.50
American Financial Corp. American Property & 27.88 33.80
Casualty Cos. Inc.
Terra Industries, Inc. Terra Nitrogen Co. 27.63 30.30
L.P.
American Home Products Corp Genetics Institute 64.25 85.00
Conseco Inc. Bankers Life 21.00 22.00
Holding Corp.
Private Group NPC International I 6.88 9.00
Sears Roebuck & Co. MaxServ Inc. 7.13 7.75
Genzyme Corp. IG Laboratories 3.00 7.15
Inc.
Seaboard Acquisition Seaboard Oil 6.75 9.75
Partners Inc Co.
Novarits AG Systemix Inc. 15.13 19.50
Bic S.A. Bic Corp. 31.50 40.50
Scor S.A. Scor US Corp. 15.50 15.00
Private Group Syms Corp. 7.00 8.75
Remco Group Inc. WCI Steel Inc. 5.25 10.00
Equity Holdings Ltd. Great American 45.00 50.00
Mgmt. & Investment Inc.
Grand Casinos Inc. Stratosphere Corp. 5.75 11.17
High 123.40 138.33
Average 28.78 37.47
Low (1.64) (3.23)
</TABLE>
Source: Mergerstat
- -------------------------------------------------------------------------------
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
<PAGE>
GOLD KIST INC.
_______________________________________________________________________________
<TABLE>
<CAPTION>
TENDER OFFER PREMIUM STUDY (1)
Acquisitions of Remaining Minority Interest
January 1, 1991 to March 31, 1997
Percentage Percentage
Held On Owned
Date Date Percentage Percentage After
Announced Acquiror Target Announced Sought Tendered Transaction
- --------- -------- ------ --------- ------ -------- -----------
<S> <C> <C> <C> <C> <C> <C>
01/03/91 Murphy Oil Corp Ocean Drilling & Exploration 61.1 38.9 34.1 100.0
Co{Odeco}(Murphy Oil Corp)
02/06/91 BHP Hamilton Oil Corp(BHP Holdings 51.7 48.3 28.1 100.0
Holdings(USA)Inc(Broken Inc/Broken Hill Proprietary)
Hill Proprietary)
05/01/91 Tele-Communications Inc United Artists Entertainment 53.2 44.8 20.8 97.9
Co(Tele-Communications Inc)
06/13/91 Staveley Industries PLC Weigh-Tronix Inc(Staveley 55.8 44.2 41.3 97.8
Industries PLC)
07/25/91 Land O' Lakes Inc Country Lake Foods Inc (Land O' 65.5 34.5 31.6 100.0
Lakes Inc)
07/30/91 Pennzoil Co Jiffy Lube International Inc 81.0 19.0 10.8 98.3
(Pennzoil Co)
09/18/91 Arkla Inc Arkla Exploration Co(Arkla Inc) 82.0 18.0 9.8 100.0
03/02/92 WR Grace & Co Grace Energy Corp(WR Grace & Co) 83.4 16.6 16.2 100.0
03/20/92 BLV Acquisition Corp Belvedere Corp(Christiania Holding 54.8 45.2 44.8 100.0
(Christiania Gen Ins. Co/UNI Storebrand A/S)
Corp)
04/24/92 USTrails Inc Thousand Trails Inc(USTrails Inc) 69.0 11.0 21.7 80.0
10/09/92 Dundee Bancorp Avalon Corp(Corona Corp) 83.5 16.5 13.4 96.8
International Inc
02/19/93 National Mutual Celina Financial Corp(Celina Group) 55.6 44.4 44.4 100.0
Insurance Co
03/22/93 New Marvel Holdings Marvel Entertainment Group 59.6 20.7 28.2 80.3
Inc (MacAndrews & Inc(MacAndrews & Forbes)
Forbes )
07/27/93 Investor Group Forum Group Inc 64.3 35.7 7.3 71.6
04/01/94 Intertape Polymer International 81.7 18.3 - 81.7
Group Inc (Altamira Container Systems Inc
Capital Corp)
04/08/94 Gruma Corp(Gruma SA de Candy's Tortilla Factory, Inc. 69.4 30.6 28.1 97.5
CV)
05/05/94 Wassall PLC General Cable Corp(Cie General des 53.7 46.3 42.0 95.7
Eaux)
08/24/94 Dole Food Co Inc Castle & Cooke Homes Inc(Dole Food 81.7 18.3 16.6 100.0
Co)
12/28/94 Fleet Financial Group Fleet Mortgage Group Inc (Fleet 81.0 19.0 16.0 100.0
Inc, Financial Group Inc)
Boston,Massachusetts
03/15/95 LinPac Mouldings Ropak Corp 54.8 45.2 44.9 92.8
Ltd(LinPac Group Ltd)
04/05/95 Club Mediterranee SA Club Med Inc 67.0 33.0 32.5 100.0
07/14/95 COBE Laboratories REN Corp-USA(COBE Laboratories 53.0 47.0 44.2 100.0
Inc(Gambro AB) Inc/Gambro AB)
09/25/95 Forum Group Inc Forum Retirement Partners LP 62.0 38.0 16.9 78.9
09/26/95 Societe Commerciale de SCOR US Corp(SCOR SA) 80.0 20.0 19.1 100.0
Reassurance{SCOR)
03/29/96 Equity Holdings Ltd Great American Mgt. & Inv. 84.3 15.7 9.1 100.0
Inc(Equity Hold. Ltd)
05/27/96 Novartis AG SyStemix Inc(Sandoz AG) 67.8 32.2 26.3 100.0
08/08/96 Chemed Corp Roto-Rooter Inc(Chemed Corp) 54.9 45.1 40.8 94.5
10/03/96 Electromagnetic LXE Inc(Electromagnetic Sciences 81.5 18.5 14.6 96.1
Sciences Inc Inc)
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) 84.5 15.5 14.8 100.0
12/06/96 Sears Roebuck & Co MaxServ Inc(Sears Roebuck & Co) 57.7 42.3 30.4 100.0
Offer Premium to Share Price
----------------------------
Date 1 Day 1 Week 4 Weeks
Announced Acquiror Target Prior Prior Prior
- --------- -------- ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
01/03/91 Murphy Oil Corp Ocean Drilling & Exploration 14.0 24.1 9.2
Co{Odeco}(Murphy Oil Corp)
02/06/91 BHP Hamilton Oil Corp(BHP Holdings 18.5 21.2 31.1
Holdings(USA)Inc(Broken Inc/Broken Hill Proprietary)
Hill Proprietary)
05/01/91 Tele-Communications Inc United Artists Entertainment 19.9 22.2 25.7
Co(Tele-Communications Inc)
06/13/91 Staveley Industries PLC Weigh-Tronix Inc(Staveley 41.9 41.9 44.3
Industries PLC)
07/25/91 Land O' Lakes Inc Country Lake Foods Inc (Land O' 39.1 45.7 53.0
Lakes Inc)
07/30/91 Pennzoil Co Jiffy Lube International Inc 20.0 20.0 20.0
(Pennzoil Co)
09/18/91 Arkla Inc Arkla Exploration Co(Arkla Inc) 8.3 28.6 30.0
03/02/92 WR Grace & Co Grace Energy Corp(WR Grace & Co) 24.6 21.6 7.8
03/20/92 BLV Acquisition Corp Belvedere Corp(Christiania Holding 44.0 57.5 40.0
(Christiania Gen Ins. Co/UNI Storebrand A/S) 120.0 95.6 60.0
Corp)
04/24/92 USTrails Inc Thousand Trails Inc(USTrails Inc) 42.9 42.9 50.0
10/09/92 Dundee Bancorp Avalon Corp(Corona Corp)
International Inc
02/19/93 National Mutual Celina Financial Corp(Celina Group) 16.0 36.5 36.5
Insurance Co
03/22/93 New Marvel Holdings Marvel Entertainment Group 53.8 42.9 58.9
Inc (MacAndrews & Inc(MacAndrews & Forbes)
Forbes )
07/27/93 Investor Group Forum Group Inc 106.9 70.4 106.9
04/01/94 Intertape Polymer International 17.1 (8.3) (12.2)
Group Inc (Altamira Container Systems Inc
Capital Corp)
04/08/94 Gruma Corp(Gruma SA de Candy's Tortilla Factory, Inc. 78.4 84.0 73.2
CV)
05/05/94 Wassall PLC General Cable Corp(Cie General des 17.1 21.5 11.6
Eaux)
08/24/94 Dole Food Co Inc Castle & Cooke Homes Inc(Dole Food 35.5 41.6 55.6
Co)
12/28/94 Fleet Financial Group Fleet Mortgage Group Inc (Fleet 19.4 18.5 18.5
Inc, Financial Group Inc)
Boston,Massachusetts
03/15/95 LinPac Mouldings Ropak Corp 4.8 6.0 4.8
Ltd(LinPac Group Ltd)
04/05/95 Club Mediterranee SA Club Med Inc 41.4 39.9 44.6
07/14/95 COBE Laboratories REN Corp-USA(COBE Laboratories 27.0 20.3 26.0
Inc(Gambro AB) Inc/Gambro AB) 41.5 50.9 41.5
09/25/95 Forum Group Inc Forum Retirement Partners LP 37.1 35.6 38.6
09/26/95 Societe Commerciale de SCOR US Corp(SCOR SA) 2.6 4.2 3.6
Reassurance{SCOR)
03/29/96 Equity Holdings Ltd Great American Mgt. & Inv. 4.7 69.6 59.2
Inc(Equity Hold. Ltd)
05/27/96 Novartis AG SyStemix Inc(Sandoz AG) 12.3 12.3 11.2
08/08/96 Chemed Corp Roto-Rooter Inc(Chemed Corp)
10/03/96 Electromagnetic LXE Inc(Electromagnetic Sciences 22.1 14.1 19.3
Sciences Inc Inc)
10/10/96 Renco Group Inc WCI Steel Inc(Renco Group Inc) 17.6 29.0 77.8
12/06/96 Sears Roebuck & Co MaxServ Inc(Sears Roebuck & Co) 19.2 67.6 55.0
Low 2.6 (8.3) (12.2)
Average 32.3 35.9 36.7
Median 21.1 32.3 37.6
High 120.0 95.6 106.9
</TABLE>
_____________________________________
Notes:
(1) Study includes tender offers for all/ part of a remaining interest by
majority interest holder. Excludes transactions that did not disclose
premium information.
Source: Securities Data Company, Inc.
________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
____________________________________________________________________________________________________________________________________
GOLDEN POULTRY COMPANY, INC.
Replacement Cost Valuation
Maximum Maximum Total
Broiler Broiler Facility Facility
Capacity Capacity Replacement Replacement
Plant Per Week Per Year (1) Cost Per Bird (2) Cost (3)
- ----- -------- ------------ ----------------- --------
<S> <C> <C> <C> <C>
Sumter, South Carolina 1,400,000 70,000,000 $65.00 $141,000,000
Siler City, North Carolina 630,000 31,500,000 $65.00 $40,950,000
Sanford, North Carolina 850,000 42,500,000 $65.00 $55,250,000
Russellville, Alabama 1,400,000 70,000,000 $65.00 $91,000,000
Douglas, Georgia 1,300,000 65,000,000 $65.00 $84,500,000
--------- ---------- ------------
Totals 5,580,000 279,000,000 $412,700,000
Less: Carolina Golden Products Co. Interest in Assets (4) $69,090,000
-----------
Enterprise Value - Total Processing Assets at 12/97 343,610,000
Less: Additional Debt Incurred for Russellville Expansion 35,000,000
------------
Net Value of Total Processing Assets 308,610,000
Less: Debt Attributable to Golden Poultry at 12/96 24,000,000
------------
Equity Value of Processing Assets $284,610,000
Shares Outstanding (5) 14,775,235
============
Value Per Share $ 19.26
============
Notes:
(1) Based on 50 week operating year after expansion of Russellville, AL plant.
(2) Facility includes hatchery, feed mill, and processing plant.
(3) Facility replacement cost for Sumter, SC includes $50 million for further processing assets.
(4) Gold Kist Inc. owns 49% of Sumter, SC plant through Carolina Golden Products Co.
(5) Based on shares outstanding - treasury shares + options.
____________________________________________________________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
___________________________________________________________________________________________________________________________________
===================================================================================================================================
GOLDEN POULTRY COMPANY, INC.
Capacity Valuation
Maximum
Broiler Live Total Ready
Capacity Capacity Capacity Weight (lbs) Live To
Plant Per Week Utilization(1) Per Year(2) Per Bird Weight (lbs) Yield Cook (lbs)(3)
- ----- -------- ------------- ---------- -------- ----------- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sumter, South Carolina 1,400,000 95% 66,500,000 4.85 322,525,000 76.14% 305,570,535
Siler City, North Carolina 630,000 95% 29,925,000 6.25 187,031,250 72.99% 136,514,109
Sanford, North Carolina 850,000 95% 40,375,000 5.25 211,968,750 77.99% 165,314,428
Russellville, Alabama 1,400,000 95% 66,500,000 6.72 446,880,000 80.01% 357,548,688
Douglas, Georgia 1,300,000 95% 61,750,000 5.53 341,477,500 78.21% 267,069,553
--------- ----------- ------------- -------------
Totals 5,580,000 265,050,000 1,509,882,500 1,232,017,313
Plant Valuation Per Lb
----------------------
$.20 $.25 $.30
---- ---- ----
Sumter, South Carolina $ 61,114,107 $ 76,392,634 $ 91,671,161
Siler City, North Carolina 27,302,822 34,128,527 40,954,233
Sanford, North Carolina 33,062,886 41,328,607 49,594,328
Russellville, Alabama 71,509,738 89,387,172 107,264,606
Douglas, Georgia 53,413,911 66,767,388 80,120,866
------------ ------------ ------------
Totals $246,403,463 $308,004,328 $369,605,194
Less: Carolina Golden Products Co. Interest in Assets (4) $ 29,945,912 $ 37,432,391 $ 44,918,869
------------ ------------ ------------
Enterprise Value - Total Processing Assets at 12/97 276,349,375 345,436,719 414,524,063
Less: Additional Debt Incurred for Russellville Expansion 35,000,000 35,000,000 35,000,000
------------ ------------ ------------
Net Value of Total Processing Assets 241,349,375 310,436,719 379,524,063
Less: Debt Attributable to Golden Poultry at 12/96 24,000,000 24,000,000 24,000,000
------------ ------------ ------------
Equity Value of Processing Assets $217,349,375 $286,436,719 $355,524,063
Shares Outstanding (5) 14,775,235 14,775,235 14,775,235
====================================================================
Value Per Share $14.71 $19.39 $24.06
====================================================================
================================================================================================================================
</TABLE>
Notes:
(1) Per Golden Poultry Company, Inc.
(2) Based on 50 week operating year after expansion of Russellville, AL plant.
(3) Ready to cook lbs. for Sumter, SC includes 60 million lbs. for further
processing business.
(4) Gold Kist Inc. owns 49% of Sumter, SC plant through Carolina Golden
Products Co.
(5) Based on shares outstanding - treasury shares + options.
________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
____________________________________________________________________________________________________________________________________
Valuation Multiples for Publicly Traded Poultry Companies
Valuation Date: April 1, 1997
Enterprise Value As a Multiple of (2)
-------------------------------------
Enterprise Book Total Current Proj.
Company Ticker Value (1) Sales EBIT EBITDA Value Assets P/E P/E
- ------- ------ --------- ----- ---- ------ ----- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WLR Foods, Inc. WLRF $ 316.7 0.31 N/M N/M 2.18 0.79 N/M N/M
Hudson Foods, Inc. HFI 594.0 0.53 14.67 8.71 1.77 0.73 20.23 11.31
Sanderson Farms, Inc. SAFM 326.6 0.70 39.68 11.62 2.70 1.33 124.04 12.12
Tyson Foods, Inc. TYSNA 4,312.8 0.67 16.77 8.69 2.72 0.99 45.45 17.34
Pilgrims Pride Corporation CHX 473.1 0.40 16.32 8.30 3.08 0.90 40.63 8.48
High 0.70 39.68 11.62 3.08 1.33 124.04 17.34
Average 0.52 21.86 9.33 2.49 0.95 57.59 12.31
Low 0.31 14.67 8.30 1.77 0.73 20.23 8.48
Golden Poultry Company,
Inc. CHIK $ 195.8 0.29 8.01 5.20 1.60 0.99 12.77 11.75
Notes:
(1) Enterprise Value (EV) = Market Value of Equity + Debt - Cash. Shown in $ millions.
(2) Based on latest twelve months.
____________________________________________________________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
</TABLE>
<PAGE>
GOLD KIST INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Valuation Based on Publicly Traded Poultry Companies
Valuation Date: April 1, 1997
($ in millions except multiples and per share figures)
Enterprise Value As a Multiple of
----------------------------------------------------
Book Total Projected
Sales EBIT EBITDA Value Assets P/E
----- ---- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Average Multiple(1) 0.52 21.86 9.33 2.49 0.95 12.31
Golden Poultry Company, Inc. $670.1 $24.4 $ 37.6 $122.2 $198.8 $ 1.00(2)
Indicated Enterprise Value $350.0 $534.3 $351.2 $304.3 $188.3
Less: Debt Attributable to Golden Poultry 24.0 24.0 24.0 24.0 24.0
------ ------ ------ ------ ------
Equity Value $326.0 $510.3 $327.2 $280.3 $164.3
Equity Value Per Share(3) $22.07 $32.53 $22.15 $18.97 $11.12 $12.31
Notes:
(1) Multiple represents mean for universe of publicly traded poultry companies.
(2) Based on IBES, Inc. 1997 forecast.
(3) Based on 14.775 million shares outstanding.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
___________________________________________________________________________________________________________________________________
Selected M&A Transactions
($ in millions)
Date Consideration
Announcement Seller Buyer Sales Consideration As a % of Sales
<S> <C> <C> <C> <C> <C>
25-Sep-96 Cargill Inc. (1) Tyson Foods, Inc. $268.0 $ 162.5 0.61
29-Sep-95 Rotelle, Inc. Richfood Holdings, Inc. 340.0 52.8 0.16
05-Aug-95 Culinary Foods, Inc. Tyson Foods, Inc. 70.0 NA NA
28-Jul-95 McCarty Farms, Inc. Tyson Foods, Inc. 320.0 206.2 0.64
29-Apr-95 New Hope Feed, Inc. WLR Foods Inc. NA 18.0 NA
01-Mar-95 Cuddy Farms Inc. (2) WLR Foods Inc. NA 73.8 NA
1989 Holly Farms Tyson Foods, Inc. NA 1,500.0 NA
___________________________________________________________________________________________________________________________________
Average 0.47
___________________________________________________________________________________________________________________________________
Notes:
(1) The total consideration is made up of $150-175mm in cash and a swine slaughtering plant.
(2) Transaction included only turkey processing assets.
___________________________________________________________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
</TABLE>
<PAGE>
GOLD KIST INC.
_______________________________________________________________________________
GOLDEN POULTRY COMPANY, INC.
Shareholder Value Analysis
$000
<TABLE>
<CAPTION>
Cumulative
Present Present
Value of Value of
Cash Flow Cash Flow Cash Flow
--------- --------- ----------
<S> <C> <C> <C>
1997 ($49,752) ($45,749) ($45,749)
1998 23,011 19,457 (26,291)
1999 15,129 11,763 (14,528)
2000 (9,071) (6,485) (21,014)
2001 37,930 24,937 3,923
Present Value of Residual Value $ 241,201
Cum. Present Value of Cash Flows and Residual Value $ 245,124
Total Marketable Securities 0
Investments in Stocks and Bonds 0
---------
Corporate Value $ 245,124
Market Value of Debt $ 24,000
Underfunded Pension Liabilities 0
Market Value of Other Obligations 0
---------
Shareholder Value $ 221,124
Shareholder Value per Share (PV) $ 14.97
Offer Price $ 14.25
Discount of Offer Price to Indicated Value (%) -4.78%
</TABLE>
_______________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
___________________________________________________________________________________________________________________________________
GOLDEN POULTRY COMPANY, INC.
Income Statement
$000
Historical Projected
----------------------------------------------------- ---------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $336,806 $388,330 $447,139 $505,975 $600,237 $690,838 $706,848 $763,396 $824,468 $890,425
Cost of Goods Sold 330,759 363,407 427,607 486,064 552,184 649,630 650,159 696,599 760,357 812,513
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Gross Profit 6,047 24,923 19,532 19,911 48,053 41,208 56,689 66,797 64,111 77,912
SG & A Expense 13,120 15,272 16,122 16,687 20,999 20,725 21,205 22,902 24,734 26,713
Other Operating
Income/(Exp.) 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Operating Income (7,073) 9,651 3,410 3,224 27,054 20,483 35,484 43,895 39,377 51,199
Other Revenues & Gains 767 1,044 299 381 208 250 250 250 250 250
Gain on Sale of Assets 0 0 0 0 0 0 (0) (0) (0) 0
Other Expenses & Losses 0 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings Before Interest &
Taxes (6,306) 10,695 3,709 3,605 27,262 20,733 35,734 44,145 39,627 51,449
Interest on Marketable
Securities 0 0 0 0 0 0 0 0 0 0
Interest Income 6 74 67 12 7 0 0 0 0 0
Interest Expense 2,273 2,366 1,311 1,703 1,459 269 4,263 2,842 1,896 2,750
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Earnings Before Minority
Int. & Taxes (8,573) 8,403 2,465 1,914 25,810 20,464 31,471 41,304 37,731 48,700
Provision for Income Taxes (1,044) 4,642 1,676 1,132 9,526 7,633 11,739 15,406 14,074 18,165
Minority Interest in Income (5,751) (4,102) (3,259) (1,965) 243 2,175 4,629 4,144 4,150 4,150
Cumul. Effect of Change In
Acctg. Prov. (1,517) 0 0 0 0 0 0 0 0 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Income ($3,295) $ 7,863 $ 4,048 $ 2,747 $ 16,041 $ 10,656 $ 15,103 $ 21,753 $ 19,507 $ 26,385
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
Common Dividends $ 492 $ 504 $ 555 $ 587 $ 582 $ 580 $ 580 $ 580 $ 580 $ 580
___________________________________________________________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
____________________________________________________________________________________________________________________________________
GOLDEN POULTRY COMPANY, INC.
Balance Sheet
$000
Historical Projected
---------------------------------------------------- ----------------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
- -----------------------
Cash $ 2,330 $ 7,502 $ 3,912 $ 2,720 $ 2,599 $ 2,696 $ 2,795 $ 2,902 $ 3,017 $ 3,142
Marketable Securities 0 0 0 0 0 0 0 0 0 535
Accounts Receivable 13,686 15,324 17,913 21,632 23,654 27,993 28,642 30,933 33,317 36,081
Inventory 31,174 34,155 41,691 46,781 54,903 62,766 62,817 67,304 73,464 78,504
Other Current Assets 453 145 1,426 1,635 2,468 4,933 7,398 9,863 12,328 14,793
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Current Assets 47,643 57,126 64,942 72,768 83,624 98,388 101,652 111,002 122,126 133,054
Gross Fixed Assets 134,535 137,998 159,146 166,981 173,057 233,057 253,057 281,057 330,057 345,057
Accumulated Depreciation 40,679 55,591 71,555 87,408 99,319 113,162 135,670 157,707 180,863 208,872
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net Fixed Assets 93,856 82,407 87,591 79,573 73,738 119,895 117,387 123,350 149,194 136,185
Other Assets 2,423 1,902 1,967 3,263 6,617 6,617 6,617 6,617 6,617 6,617
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Assets $143,922 $141,435 $154,500 $155,604 $163,979 $224,900 $225,656 $240,969 $277,937 $275,856
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
LIABILITIES:
- -----------------------
Accounts Payable $ 13,185 $ 13,912 $ 18,008 $ 19,325 $ 26,292 $ 27,316 $ 27,339 $ 29,291 $ 31,885 $ 34,166
Current Portion of
Long-Term Debt 1,166 1,175 1,186 1,036 585 612 627 644 662 0
Current Portion of LTD:
Gold Kist 0 0 8,240 0 0 0 0 0 0 0
Short-term Borrowings 5,175 0 0 9,221 0 0 0 0 0 0
Due to Gold Kist 2,790 5,841 8,447 5,075 1,207 0 0 0 0 0
Income Taxes Payable 0 474 242 485 2,705 0 0 0 0 0
Current Deferred Tax
Liabilities 0 0 0 0 0 0 0 0 0 0
Other Current Liabilities 2,609 4,125 3,995 4,688 8,300 8,300 8,300 8,300 8,300 8,300
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Current Liabilities 24,925 25,527 40,118 39,830 39,089 36,228 36,266 38,235 40,847 42,466
Long-Term Debt: Scheduled 8,823 7,648 13,462 12,425 4,840 4,255 3,643 3,016 2,372 1,710
Long-Term Debt: Gold Kist 25,000 20,000 0 0 0 0 0 0 0 0
Long-Term Debt: Excess 0 0 0 0 0 51,890 33,936 22,121 33,538 0
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Long-Term Debt 33,823 27,648 13,462 12,425 4,840 56,145 37,579 25,137 35,910 1,710
Minority Interest 4,582 479 8,980 9,954 10,198 12,373 17,002 21,146 25,296 29,446
Other Liabilities 2,664 2,473 3,720 4,509 5,495 5,720 5,853 6,321 6,827 7,373
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Liabilities 65,994 56,127 66,280 66,718 59,622 110,467 96,700 90,839 108,880 80,994
EQUITY:
- -----------------------
Common Stock 65,287 65,308 65,335 65,363 65,464 65,464 65,464 65,464 65,464 65,464
Treasury Stock 0 0 (608) (2,130) (2,219) (2,219) (2,219) (2,219) (2,219) (2,219)
Retained Earnings 12,641 20,000 23,493 25,653 41,112 51,188 65,711 86,885 105,812 131,617
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Stockholders' Equity 77,928 85,308 88,220 88,886 104,357 114,433 128,956 150,130 169,057 194,862
Total Liabilities & Equity $143,922 $141,435 $154,500 $155,604 $163,979 $224,900 $225,656 $240,969 $277,937 $275,856
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
___________________________________________________________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
____________________________________________________________________________________________________________________________________
GOLDEN POULTRY COMPANY, INC.
Cash Flow Statement
$000
Historical Projected
-------------------------------------------- -------------------------------------------------------
1993 1994 1995 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sales $388,330 $447,139 $505,975 $600,237 $ 690,838 $706,848 $763,396 $824,468 $890,425
Cost of Goods Sold 363,407 427,607 486,064 552,184 649,630 650,159 696,599 760,357 812,513
-------- ------- -------- -------- -------- -------- -------- ------- --------
Gross Profit 24,923 19,532 19,911 48,053 41,208 56,689 66,797 64,111 77,912
SG&A Expense 15,272 16,122 16,687 20,999 20,725 21,205 22,902 24,734 26,713
Other Operating Income/(Exp.) 0 0 0 0 0 0 0 0 0
Depreciation Expense (Funds) 15,657 16,411 16,905 15,499 13,843 22,508 22,037 23,157 28,008
Funds from Operations Before
Tax 25,308 19,821 20,129 42,553 34,326 57,992 65,932 62,533 79,208
Total Taxes on Operations 4,642 1,676 1,132 9,526 7,633 11,739 15,406 14,074 18,165
-------- ------- -------- -------- -------- -------- -------- ------- --------
Funds from Operations After
Tax 20,666 18,145 18,997 33,027 26,693 46,253 50,526 48,460 61,043
Incremental Working Capital
Invest. 6,766 4,082 5,573 (1,943) 16,445 3,242 7,397 8,530 8,112
Fixed Capital Investment 4,369 21,661 9,011 12,571 60,000 20,000 28,000 49,000 15,000
Proceeds from Sale of Assets 161 66 124 2,907 0 0 0 0 0
-------- ------- -------- -------- -------- -------- -------- ------- --------
Cash Flow from Operations $ 9,692 ($7,532) $ 4,537 $ 25,306 ($49,752) $ 23,011 $ 15,129 ($9,071) $ 37,930
======== ======= ======== ======== ======== ======== ======== ======= ========
____________________________________________________________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GOLD KIST INC.
____________________________________________________________________________________________________________________________________
GOLDEN POULTRY COMPANY, INC.
Ratio Analysis
Historical Projected
------------------------------------------------ -------------------------------------------
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross Profit Margin 1.80% 6.42% 4.37% 3.94% 8.01% 5.96% 8.02% 8.75% 7.78% 8.75%
Change in Net Income N/A -338.63% -48.52% -32.14% 483.95% -33.57% 41.73% 44.03% -10.33% 35.26%
Return on Sales -0.98% 2.02% 0.91% 0.54% 2.67% 1.54% 2.14% 2.85% 2.37% 2.96%
Return on Equity -4.23% 9.22% 4.59% 3.09% 15.37% 9.31% 11.71% 14.49% 11.54% 13.54%
Return on Assets or Investment -3.65% 4.33% 1.36% 1.60% 10.82% 5.82% 10.63% 11.93% 9.19% 12.07%
LEVERAGE RATIOS:
Debt/Equity Ratio (%) 55.12% 40.63% 35.52% 31.23% 6.36% 49.60% 29.63% 17.17% 21.63% 0.88%
Debt/Total Capital (%) 35.53% 28.89% 26.21% 23.80% 5.98% 33.15% 22.86% 14.66% 17.79% 0.87%
Equity Ratio 54.15% 60.32% 57.10% 57.12% 63.64% 50.88% 57.15% 62.30% 60.83% 70.64%
ACTIVITY RATIOS:
Days in Receivables 14.872 14.403 14.622 15.605 14.423 14.790 14.790 14.790 14.790 14.790
Days in Payables 14.590 13.973 15.371 14.512 17.427 15.348 15.348 15.348 15.348 15.348
Inventory Turnover 10.610 10.640 10.257 10.390 10.057 10.350 10.350 10.350 10.350 10.350
Fixed Asset Turnover 3.589 4.712 5.105 6.359 8.140 5.762 6.022 6.189 5.526 6.538
Total Asset Turnover 2.340 2.746 2.894 3.252 3.660 3.072 3.132 3.168 2.966 3.228
LIQUIDITY RATIOS:
Quick Ratio 0.643 0.894 0.544 0.611 0.672 0.847 0.867 0.885 0.890 0.936
Current Ratio 1.911 2.238 1.619 1.827 2.139 2.716 2.803 2.903 2.990 3.133
Working Capital 22,718 31,599 24,824 32,938 44,535 62,160 65,386 72,766 81,279 90,588
Operating Working Capital 31,849 38,615 42,697 48,270 46,327 62,772 66,013 73,410 81,941 90,053
VALUE DRIVERS:
Sales Growth Rate N/A 15.30% 15.14% 13.16% 18.63% 15.09% 2.32% 8.00% 8.00% 8.00%
Operating Profit Margin -2.10% 2.49% 0.76% 0.64% 4.51% 2.96% 5.02% 5.75% 4.78% 5.75%
Incremental Fixed Capital Invest. N/A -21.91% 8.93% -13.42% -3.11% 50.95% -15.66% 10.54% 42.32% -19.72%
Incremental Working Capital Invest. N/A 13.13% 6.94% 9.47% -2.06% 18.15% 20.25% 13.08% 13.97% 12.30%
Cash Income Tax Rate 14.76% 48.10% 49.15% 35.11% 35.21% 37.27% 33.08% 35.10% 35.74% 35.48%
Cost of Capital (%) 0.00% 0.00% 0.00% 0.00% 0.00% 8.75% 8.75% 8.75% 8.75% 8.75%
____________________________________________________________________________________________________________________________________
MERGERS & ACQUISITIONS SUNTRUST CAPITAL MARKETS, INC.
</TABLE>
<PAGE>
EXHIBIT (d)(1)
GOLDEN POULTRY COMPANY, INC.
244 PERIMETER CENTER PARKWAY, N.E.
ATLANTA, GEORGIA 30346
June , 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders
(including any adjournment or postponement thereof, the "Special Meeting") of
Golden Poultry Company, Inc. (the "Company") to be held at the Company's
corporate offices, 244 Perimeter Center Parkway, N.E., Atlanta, Georgia, on
the day of July, 1997, at 10:00 a.m., local time.
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt an Agreement and Plan of Merger (the "Merger
Agreement"), dated as of April 22, 1997, among the Company, Gold Kist Inc.
("Gold Kist"), Agri International, Inc., a wholly owned subsidiary of Gold
Kist and the direct owner of 75% of the Company's Common Stock ("Agri"), and
Golden Poultry Acquisition Corp., a wholly owned subsidiary of Agri ("Merger
Sub"). Pursuant to the Merger Agreement, Merger Sub will be merged into the
Company (the "Merger") with the Company being the surviving corporation.
Merger Sub was organized by Gold Kist, the beneficial owner of 75% of the
Company's outstanding common stock and the proponent of the Merger, solely to
facilitate the Merger.
Pursuant to the terms of the Merger Agreement, all shareholders of the
Company, other than Gold Kist and those shareholders who perfect their
dissenters' rights under applicable Georgia law, will be entitled to receive
$14.25 per share in cash in exchange for each share of the Company's common
stock, no par value (the "Common Stock"), held by them at the effective time
of the Merger.
Following the Merger, all of the capital stock of the Company will be
beneficially owned by Gold Kist. The present holders of Common Stock (other
than Gold Kist) will no longer have any equity interest in the Company.
The Company's Board of Directors appointed a Special Committee on January
23, 1997, consisting of three directors of the Company who are not employees
of the Company, Gold Kist or any of its subsidiaries or affiliates. The
Special Committee has, among other things, reviewed and considered the
proposed Merger and negotiated its terms with Gold Kist. In connection
therewith, the Special Committee retained The Robinson-Humphrey Company, Inc.
to act as its financial advisor. THE COMPANY'S BOARD OF DIRECTORS AND THE
SPECIAL COMMITTEE HAVE UNANIMOUSLY APPROVED THE MERGER AS BEING IN THE BEST
INTERESTS OF THE COMPANY AND THE SHAREHOLDERS OF THE COMPANY WHO ARE NOT
AFFILIATED WITH GOLD KIST (THE "MINORITY SHAREHOLDERS"). ACCORDINGLY, THE
COMPANY'S BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE RECOMMEND THAT YOU VOTE
FOR APPROVAL OF THE MERGER AGREEMENT.
Attached is a Notice of Special Meeting of Shareholders and a Proxy Statement
containing a discussion of the Merger. We urge you to read this material
carefully. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT IN THE
ENCLOSED PREPAID ENVELOPE AS SOON AS POSSIBLE. If you attend the Special
Meeting, you may vote in person if you wish, even if you have previously
returned your proxy card.
YOUR VOTE IS IMPORTANT FOR THE APPROVAL OF THE MERGER. IN ADDITION TO
REQUIRING THE AFFIRMATIVE APPROVAL OF THE MERGER AGREEMENT AND THE MERGER BY A
MAJORITY OF ALL SHARES OF COMMON STOCK ENTITLED TO VOTE AT THE SPECIAL MEETING
AS REQUIRED BY GEORGIA LAW, THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE
OF A MAJORITY OF THE SHARES OF COMMON STOCK
<PAGE>
HELD BY THE MINORITY SHAREHOLDERS ENTITLED TO VOTE AT THE SPECIAL MEETING.
YOUR PROMPT COOPERATION WILL BE GREATLY APPRECIATED.
Sincerely,
K.N. Whitmire
Chief Executive Officer
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<PAGE>
GOLDEN POULTRY COMPANY, INC.
244 PERIMETER CENTER PARKWAY, N.E.
ATLANTA, GEORGIA 30346
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JULY , 1997
TO THE SHAREHOLDERS OF GOLDEN POULTRY COMPANY, INC.:
A Special Meeting of Shareholders (the "Special Meeting") of Golden Poultry
Company, Inc. (the "Company"), will be held at the Company's corporate
offices, 244 Perimeter Center Parkway, N.E., Atlanta, Georgia, on the day
of July, 1997, at 10:00 a.m. local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of April 22, 1997 (the "Merger Agreement"),
among the Company, Gold Kist Inc. ("Gold Kist"), Agri International,
Inc., a wholly owned subsidiary of Gold Kist and the direct owner of 75%
of the Company's Common Stock ("Agri"), and Golden Poultry Acquisition
Corp., a wholly owned subsidiary of Agri ("Merger Sub"), pursuant to
which, among other things, (a) Merger Sub will be merged into the
Company (the "Merger") with the Company being the surviving corporation
(the "Surviving Corporation") and pursuant to which the separate
existence of Merger Sub will cease, (b) each outstanding share of the
Company's common stock, no par value (the "Common Stock"), except Common
Stock held by the Company as treasury stock or beneficially owned by
Gold Kist or by persons who perfect their dissenters' rights under
Georgia law, will be converted into the right to receive $14.25 in cash,
without interest, (c) each outstanding share of Common Stock
beneficially owned by Gold Kist or held by the Company as treasury stock
will be canceled without consideration, and (d) each outstanding share
of Merger Sub common stock will be converted into one share of common
stock of the Surviving Corporation.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
A copy of the Merger Agreement is included as Exhibit A to the accompanying
Proxy Statement. Only shareholders of record of Common Stock at the close of
business on June 9, 1997 will be entitled to notice of and to vote at the
Special Meeting (the "Voting Shares"). The Special Meeting may be adjourned
from time to time without notice other than announcement at the Special
Meeting, and any business for which notice of the Special Meeting is hereby
given may be transacted at any such adjournment. A complete list of
shareholders entitled to vote at the meeting will be available for inspection
by shareholders at the offices of the Company immediately prior to the Special
Meeting.
In accordance with the Georgia Business Corporation Code (the "GBCC"), the
affirmative vote of a majority of the Voting Shares is required to approve the
Merger Agreement and the Merger. In addition, pursuant to the terms of the
Merger Agreement, the affirmative vote of a majority of the Voting Shares held
by the shareholders of the Company other than Gold Kist and its affiliates
(the "Minority Shareholders") is also required to approve the Merger Agreement
and the Merger.
If the Merger is consummated, holders of Common Stock who do not vote in
favor of the Merger Agreement and who perfect their statutory dissenters'
rights under Article 13 of the GBCC will have the right to seek payment for
their shares of Common Stock. See "Dissenters' Rights" in the accompanying
Proxy Statement for a statement of the rights of such shareholders and a
description of the procedures required to be followed by shareholders to
obtain appraisal of their Common Stock. A copy of Article 13 of the GBCC is
included as Exhibit B to the accompanying Proxy Statement.
<PAGE>
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
By order of the Board of Directors,
Jack L. Lawing,
Secretary
Atlanta, Georgia
June , 1997
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE SPECIAL MEETING IN PERSON,
PLEASE VOTE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
BUSINESS REPLY ENVELOPE. IF YOU DO ATTEND THE MEETING, YOU MAY, IF YOU WISH,
WITHDRAW YOUR PROXY AND VOTE IN PERSON.
THE COMPANY'S BOARD OF DIRECTORS AND THE SPECIAL COMMITTEE RECOMMEND THAT
YOU VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT. IN ADDITION TO THE VOTE
REQUIRED BY GEORGIA LAW, THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES HELD BY THE MINORITY SHAREHOLDERS IS NECESSARY TO
APPROVE THE MERGER AGREEMENT AND THE MERGER.
<PAGE>
GOLDEN POULTRY COMPANY, INC.
244 PERIMETER CENTER PARKWAY, N.E.
ATLANTA, GEORGIA 30346
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JULY , 1997
----------------
INTRODUCTION
This Proxy Statement is being furnished to the holders of common stock, no
par value (the "Common Stock"), of Golden Poultry Company, Inc., a Georgia
corporation (the "Company"), in connection with the solicitation of proxies by
the Board of Directors of the Company for use at a special meeting of the
shareholders of the Company to be held at the offices of the Company, 244
Perimeter Center Parkway, N.E., Atlanta, Georgia on , July , 1997
at 10:00 a.m., local time, and at any adjournment or postponement thereof (the
"Special Meeting"). This Proxy Statement and the attached Notice of Special
Meeting of Shareholders and the proxy card are first being mailed to
shareholders of the Company on or about , 1997.
PROPOSAL TO BE CONSIDERED AT THE SPECIAL MEETING
At the Special Meeting, the shareholders of the Company will consider and
vote upon a proposal to approve and adopt an Agreement and Plan of Merger (the
"Merger Agreement"), dated as of April 22, 1997, among the Company, Gold Kist
Inc., a Georgia corporation ("Gold Kist"), Agri International, Inc., a Georgia
corporation, a wholly owned subsidiary of Gold Kist and the direct owner of
75% of the Company's Common Stock ("Agri"), and Golden Poultry Acquisition
Corp., a Georgia corporation and a wholly owned subsidiary of Agri ("Merger
Sub"). Merger Sub was organized by Gold Kist solely to facilitate the proposed
transaction.
The Merger Agreement provides, subject to approval of the shareholders at
the Special Meeting, for the merger of Merger Sub into the Company (the
"Merger"), with the Company being the surviving corporation (the "Surviving
Corporation"). Following the Merger, the Company will be a direct wholly owned
subsidiary of Agri, and therefore an indirect wholly owned subsidiary of Gold
Kist. Pursuant to the Merger, (i) each outstanding share of Common Stock
(other than shares held by the Company as treasury stock, beneficially owned
by Gold Kist or owned by shareholders who do not vote in favor of the Merger
Agreement and who perfect their dissenters' rights under Article 13 of the
Georgia Business Corporation Code ("GBCC")) will receive $14.25 per share in
cash, without interest (the "Merger Consideration"), (ii) each outstanding
share of Common Stock beneficially owned by Gold Kist or held by the Company
as treasury stock will be canceled without consideration, and (iii) each
outstanding share of Merger Sub common stock, no par value, will be converted
into one share of common stock of the Surviving Corporation. As a result of
the Merger, current shareholders of the Company (other than Gold Kist) will no
longer have any equity interest in the Company. A copy of the Merger Agreement
is included as Exhibit A to this Proxy Statement.
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
The Board of Directors of the Company has fixed the close of business on
June 9, 1997 (the "Record Date") as the date for the determination of
shareholders entitled to notice of and to vote at the Special Meeting and any
adjournment or postponement thereof. Accordingly, only holders of record of
Common Stock at the close of business on that date will be entitled to notice
of and to vote at the Special Meeting (the "Voting Shares"). At the close of
business on the Record Date, there were shares of Common Stock
(held by shareholders of record) outstanding and entitled to vote at
the Special Meeting.
Each holder of record of Voting Shares on the Record Date is entitled to
cast one vote per share in person or by proxy at the Special Meeting and any
adjournment or postponement thereof. The presence, in person or by
<PAGE>
proxy, at the Special Meeting of the holders of a majority of the total Voting
Shares entitled to vote is necessary to constitute a quorum at the Special
Meeting. Abstentions and broker non-votes (which occur when shares held by
brokers or nominees for beneficial owners are voted on some matters but not on
others) will be counted as shares present for purposes of determining the
presence of a quorum.
Pursuant to the GBCC, the Merger Agreement must be approved by the holders
of at least a majority of the outstanding Voting Shares. Pursuant to the terms
of the Merger Agreement, Gold Kist, which as of the Record Date was the
beneficial owner of 10,901,802 shares of Common Stock entitled to vote at the
Special Meeting, representing approximately 75% of the outstanding Voting
Shares, has agreed to vote in favor of the Merger Agreement. In addition,
pursuant to the terms of the Merger Agreement, a majority of the Voting Shares
held by shareholders of the Company other than Gold Kist and its affiliates
(the "Minority Shareholders") is required to approve the Merger Agreement at
the Special Meeting. See "The Merger Agreement--Conditions to Consummation of
the Merger."
Holders of Common Stock who do not vote in favor of, or who abstain from
voting on, the Merger Agreement and who comply with the provisions of Article
13 of the GBCC will have the right to receive cash payment for the "fair
value" of their Common Stock. Any shareholder contemplating the exercise of
dissenters' rights should carefully review Article 13 of the GBCC,
particularly the procedural steps required to perfect dissenters' rights, a
description of which is provided herein under "Dissenters' Rights." A
shareholder who fails to comply with such procedural requirements will lose
such holder's dissenters' rights and will receive the Merger Consideration for
the shares of Common Stock held by such shareholder. See "Dissenters' Rights"
and Exhibit B, "Article 13 of the Georgia Business Corporation Code."
PROXIES
All Voting Shares represented by properly executed proxies received prior to
or at the Special Meeting and not revoked will be voted in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted FOR the proposal to approve and adopt the Merger
Agreement, and in the discretion of the persons named in the proxy on such
other matters as may properly be presented at the Special Meeting. For
purposes of determining whether a proposal has received sufficient votes for
adoption, abstentions and broker non-votes will have the effect of a vote
against the Merger Agreement.
A shareholder may revoke his or her proxy at any time prior to its use by
delivering to the Secretary of the Company a signed notice of revocation or a
later dated and signed proxy or by attending the Special Meeting and voting in
person. Attendance at the Special Meeting will not in itself constitute the
revocation of a proxy.
The cost of solicitation of proxies will be paid by the Company. In addition
to solicitation by mail, directors, officers and regular employees of the
Company may solicit proxies by telephone, telegram or by personal interviews.
Such persons will receive no additional compensation for such services. The
Company has retained Georgeson & Company, Inc. to assist in the solicitation
of proxies at a cost of approximately $15,000. The Company will reimburse
brokers, fiduciaries, custodians and other nominees for their charges and
expenses in forwarding proxy material to the beneficial owners of Voting
Shares held of record by such persons.
The date of this Proxy Statement is June , 1997.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Schedule 13E-3 Transaction Statement (including any amendments
thereto, the "Schedule 13E-3") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), with respect to the Merger. This Proxy Statement
does not contain all the information set forth in the Schedule 13E-3 and the
exhibits thereto, certain parts of which are omitted in accordance with the
rules and regulations of the Commission.
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission.
<PAGE>
The Schedule 13E-3 and the respective exhibits thereto, as well as such
reports, proxy statements and other information filed by the Company with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549; and at the Commission's Northeast Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048, and Midwest Regional Office,
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such material can also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants such as the Company that file electronically with the Commission.
The address of such site is http://www.sec.gov. The Common Stock is traded on
the Nasdaq National Market and certain of the Company's reports, proxy
materials and other information are available at the offices of the Nasdaq
National Market, 1735 K Street, N.W., Washington, D.C. 20006.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION...............................................................
Proposal to be Considered at the Special Meeting.........................
Voting Rights; Votes Required for Approval...............................
Proxies..................................................................
AVAILABLE INFORMATION......................................................
SUMMARY....................................................................
SPECIAL FACTORS............................................................
Background of the Merger.................................................
Recommendations of the Special Committee, the Board and Gold Kist........
Opinion of the Special Committee's Financial Advisor.....................
Report of Financial Advisor of Gold Kist.................................
Purpose and Structure of the Merger......................................
Plans for the Company After the Merger...................................
Certain Effects of the Merger............................................
Interests of Certain Persons in the Merger; Certain Relationships........
Certain Federal Income Tax Consequences of the Merger....................
Accounting Treatment of the Merger.......................................
Certain Litigation.......................................................
Regulatory Approvals.....................................................
THE MERGER AGREEMENT.......................................................
General..................................................................
Effective Time of the Merger.............................................
The Surviving Corporation................................................
Consideration to be Received by Shareholders of the Company..............
Representations and Warranties...........................................
Covenants................................................................
Other Potential Bidders..................................................
Conditions to Consummation of the Merger.................................
Termination..............................................................
Expenses.................................................................
Amendments...............................................................
DISSENTERS' RIGHTS.........................................................
SOURCE OF FUNDS FOR THE MERGER.............................................
Bank Financing...........................................................
Estimated Fees and Expenses..............................................
BUSINESS OF THE COMPANY....................................................
The Broiler Industry.....................................................
General..................................................................
Products.................................................................
Operations and Facilities................................................
Marketing and Sales......................................................
Competition..............................................................
Administrative Services Agreement........................................
Environmental and Regulatory Matters.....................................
Human Resources..........................................................
Properties...............................................................
SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY...................
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.................................................
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General.................................................................
Results of Operations...................................................
Liquidity and Capital Resources.........................................
Future Accounting Requirements..........................................
Effects of Inflation....................................................
MARKET PRICES FOR THE COMMON STOCK........................................
DIVIDENDS.................................................................
CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI AND MERGER SUB.............
Gold Kist...............................................................
Merger Sub..............................................................
General.................................................................
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY, GOLD KIST, MERGER SUB AND
THE SURVIVING CORPORATION................................................
Information Concerning Directors and Executive Officers of the Company..
Information Concerning Directors and Executive Officers of Gold Kist and
Merger Sub.............................................................
Information Concerning Directors and Executive Officers of the Surviving
Corporation............................................................
SECURITY OWNERSHIP OF THE COMPANY.........................................
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS..............................
TRANSACTION OF OTHER BUSINESS.............................................
INDEPENDENT AUDITORS......................................................
SHAREHOLDER PROPOSALS.....................................................
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...........................
INDEX TO FINANCIAL STATEMENTS.............................................
</TABLE>
EXHIBIT A: Merger Agreement
EXHIBIT B: Article 13 of the Georgia Business Corporation Code
EXHIBIT C: Opinion of The Robinson-Humphrey Company, Inc.
EXHIBIT D: Opinion of SunTrust Capital Markets, Inc.
<PAGE>
SUMMARY
The following is a summary of certain information contained elsewhere in this
Proxy Statement. The following summary is not intended to be a complete
description of the matters covered in this Proxy Statement and is subject to
and qualified in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement, including the Exhibits hereto.
Shareholders are urged to read carefully the entire Proxy Statement, including
the Exhibits.
GENERAL
Time, Place and Date of
the Special Meeting.....
The Special Meeting of shareholders of the Company
will be held at the Company's corporate offices, 244
Perimeter Center Parkway, N.E., Atlanta, Georgia
30346 on , July , 1997 at 10:00 a.m., local
time.
Record Date ............ Any holders of record of Common Stock at the close of
business on June 9, 1997 are entitled to notice of
and to vote at the Special Meeting. On such date,
there were shares of Common Stock
outstanding, with each such Voting Share entitled to
cast one vote with respect to the Merger at the
Special Meeting. See "Introduction--Voting Rights;
Votes Required for Approval."
Purpose of the Special
Meeting; Quorum; Vote
Required ............... At the Special Meeting, shareholders will consider
and vote upon a proposal to approve the Merger
Agreement, a copy of which is included as Exhibit A
to this Proxy Statement. See "Introduction--Proposal
to be Considered at the Special Meeting." The
presence at the Special Meeting, in person or by
proxy, of the holders of a majority of the
outstanding shares of Common Stock is necessary to
constitute a quorum at the Special Meeting. Pursuant
to the GBCC, approval of the Merger Agreement
requires the affirmative vote of the holders of a
majority of the outstanding Voting Shares. Gold Kist,
who as of the Record Date was the beneficial owner of
approximately 75% of the Voting Shares entitled to
vote at the Special Meeting, has agreed to vote all
of the Voting Shares held by it in favor of the
Merger Agreement, which assures that the Merger
Agreement will be approved in accordance with such
GBCC requirement. However, the Merger Agreement
requires the affirmative vote of a majority of the
Voting Shares held by the Minority Shareholders. See
"Introduction--Voting Rights; Votes Required for
Approval" and "The Merger Agreement--Conditions to
Consummation of the Merger."
Structure of the Merger Pursuant to the Merger Agreement, Merger Sub will
........................ merge into the Company, with the Company being the
Surviving Corporation and a wholly owned subsidiary
of Gold Kist. Each outstanding share of Common Stock
(except those shares of Common Stock held by the
Company as treasury stock, owned by Gold Kist or
owned by shareholders who perfect their dissenters'
rights under the GBCC) will be converted into the
right to receive $14.25 in cash, without interest.
Each outstanding share of Common Stock beneficially
owned by Gold Kist or held by the Company as treasury
stock will be canceled without consideration. Each
1
<PAGE>
outstanding share of common stock, no par value, of
Merger Sub will be converted into one share of common
stock of the Surviving Corporation. See "Special
Factors--Purpose and Structure of the Merger," "--
Interests of Certain Persons in the Merger; Certain
Relationships" and "The Merger Agreement."
Plans for the Company
After the Merger........
After the Merger, the Company will become a wholly
owned subsidiary of Gold Kist. Gold Kist may
liquidate the Company as part of converting it into a
cooperative operation. However, the Gold Kist Board
of Directors has reserved the right to make its final
decision about the method of converting the Company
to a cooperative until after the Merger has been
completed. The Company has not formulated any
specific plans in the event the Merger is not
consummated. See "Special Factors--Plans for the
Company After the Merger."
Certain Effects of the
Merger .................
As a result of the Merger, the entire equity interest
in the Company will be beneficially owned by Gold
Kist. Therefore, following the Merger, the present
holders of Common Stock (other than Gold Kist) will
no longer have an equity interest in the Company.
Instead, each such holder of Common Stock will have
only the right to receive the Merger Consideration
for each share of Common Stock held or to seek
dissenters' rights as described under the caption
"Dissenters' Rights." If the Merger is consummated,
Gold Kist intends to cause the Company to terminate
the registration of the Common Stock under the
Exchange Act and its obligation to file reports,
proxy statements and other information with the
Commission. In addition, if the Merger is
consummated, Gold Kist intends to cause the Company
to terminate its listing of shares for trading on the
Nasdaq National Market. See "Special Factors--Certain
Effects of the Merger."
Opinion of Financial
Advisor to Special
Committee ..............
The Robinson-Humphrey Company, Inc. ("Robinson-
Humphrey"), a nationally recognized investment
banking firm, has rendered its written opinion to the
Special Committee, as described below, of the
Company's Board of Directors to the effect that the
Merger is fair, from a financial point of view, to
holders of Common Stock who are unaffiliated with
Gold Kist. In connection with its opinion, Robinson-
Humphrey conducted, among other analyses: (i) a
review of the industry and the competitive climate in
which the Company operates, and its competitive
position therein; (ii) a review of the business,
historical financial performance and prospects of the
Company; (iii) a review of the historical and current
market prices and trading patterns of the Common
Stock; (iv) an analysis of the Merger Consideration
in relation to the market prices of securities of,
and financial data of, other companies engaged in
similar businesses as the Company; (v) a review and
analysis of prices and premiums paid in, and other
terms of, other recent "going private" acquisition
transactions; (vi) a discounted cash flow analysis of
the Company; and (vii) a review and analysis of
consideration paid for capacity additions in the
industry. Robinson-Humphrey also held discussions
with members of the senior management of the Company
regarding the Company's past and
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current business operations, financial condition and
future prospects. The full text of Robinson-
Humphrey's written opinion which sets forth the
assumptions made, procedures followed, matters
considered and limits of its review, is included as
Exhibit C. HOLDERS OF COMMON STOCK ARE URGED TO READ
SUCH OPINION IN ITS ENTIRETY. For additional
information relating to the opinion of Robinson-
Humphrey, see "Special Factors--Opinion of the
Special Committee's Financial Advisor."
Opinion of Financial
Advisor to Gold Kist....
SunTrust Capital Markets, Inc. ("SunTrust"), a
nationally recognized investment banking firm, has
rendered its written opinion to the Board of
Directors of Gold Kist to the effect that the Merger
is fair, from a financial point of view, to the
members of Gold Kist. In connection with its opinion,
SunTrust: (i) conducted interviews with the Company's
management concerning the Company's historical
operating experience and future prospects; (ii)
visited the Company's processing facilities; and
(iii) performed various valuation analyses using
generally accepted methodologies, including (a) an
evaluation of the Company's industry, including its
historical performance, competitive environment, and
future prospects; (b) an analysis of the replacement
cost of the Company's assets; (c) an analysis of the
Company's assets based on processing capacity; (d) an
analysis of the value of the Company based on
discounted cash flows; (e) an analysis of the public
trading multiples of comparable companies; (f) an
analysis of premiums paid in transactions involving
the acquisition of a remaining minority interest by a
majority owner; and (h) an analysis of premiums paid
in transactions involving the acquisition of a
remaining minority interest by a majority owner
through a tender offer. The full text of SunTrust's
written opinion, dated as of the date of this Proxy
Statement, which sets forth the assumptions made,
procedures followed, matters considered and limits of
its review, is included as Exhibit D. HOLDERS OF
COMMON STOCK ARE URGED TO READ SUCH OPINION IN ITS
ENTIRETY. For additional information relating to the
opinion of SunTrust, see "Special Factors--Report of
Financial Advisor of Gold Kist."
<TABLE>
<C> <S>
</TABLE>
Determination of
Special Committee;
Recommendation of
Company's Board of
Directors...............
A special committee of the Board of Directors,
consisting of three directors of the Company who are
not employed by or affiliated with the Company
(except in their capacity as directors), Gold Kist,
Merger Sub or any of their subsidiaries or affiliates
(other than the Company), and who do not hold and
will not acquire any equity interest in Gold Kist or
Merger Sub (the "Special Committee"), has unanimously
determined, based in part upon the opinion of
Robinson-Humphrey, that the Merger and the Merger
Consideration are fair to, and in the best interests
of, the shareholders of the Company who are not
affiliated with Gold Kist and has recommended
approval of the Merger Agreement by the Board of
Directors and shareholders of the Company. After
considering the
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recommendation of the Special Committee, the Board of
Directors has unanimously approved the Merger
Agreement and recommends that shareholders vote FOR
the proposal to approve and adopt the Merger
Agreement. The Board of Directors' recommendation is
based upon the following factors, among others: (i)
the analyses, conclusions and recommendations of the
Special Committee; (ii) the opinion of Robinson-
Humphrey; and (iii) the fact that the Merger
Consideration was the result of arms' length
negotiations between the Special Committee and
members of the Board of Directors of Gold Kist and
their respective legal and financial advisors. See
"Special Factors--Background of the Merger" and "--
Recommendations of the Special Committee, the Board
and Gold Kist."
Interests of Certain
Persons in the Merger;
Conflicts of Interest...
Certain directors and officers of the Company
beneficially own an aggregate of approximately 1.91%
of the outstanding Voting Shares, and will be
entitled to receive the Merger Consideration for such
shares. In addition, Gold Kist, through its wholly
owned subsidiary Agri, is the beneficial owner of
approximately 75% of the outstanding Voting Shares
and is deemed to control the Company.
Messrs. P.J. Gibbons, J.L. Stewart, G.O. Coan, K.N.
Whitmire and J. Bekkers, who are members of the
Company's Board of Directors, are affiliated with
Gold Kist or its other subsidiaries. In addition,
Mr. Whitmire serves as the Company's Chief Executive
Officer. Because the GBCC requires the Merger
Agreement to be approved by a majority of a
corporation's board of directors, such directors, who
constitute six of the eleven members of the Board of
Directors of the Company, participated in the vote of
the Board of Directors concerning the Merger and the
Merger Agreement.
Gold Kist has agreed that all rights to
indemnification arising at or prior to the
effectiveness of the Merger in favor of the directors
or officers of the Company (including the members of
the Special Committee) as provided in the Company's
articles of incorporation and bylaws, as in effect on
the date of the Merger Agreement, and in contractual
indemnification agreements and director and officer
liability insurance currently in effect and covering
directors and officers of the Company, will, for a
period of six years survive the Merger and continue
in full force and effect. See "Special Factors--
Interests of Certain Persons in the Merger; Certain
Relationships" and "The Merger Agreement--Covenants."
Federal Income Tax
Consequences............
The receipt of cash for Common Stock pursuant to the
Merger will be a taxable transaction for federal
income tax purposes under the Internal Revenue Code
of 1986, as amended (the "Code"), and also may be a
taxable transaction under applicable state, local,
foreign and other tax laws. See "Special Factors--
Certain Federal Income Tax Consequences."
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<PAGE>
THE MERGER AGREEMENT
Effective Time of the The Merger will become effective upon the filing of a
Merger.................. certificate of merger with the Secretary of State of
the State of Georgia or at such later time as is
specified in such certificate of merger (the
"Effective Time"). The filing will occur after all
conditions to the merger contained in the Merger
Agreement have been satisfied or waived. The Company
and Gold Kist anticipate that the Merger will be
consummated as promptly as practicable following the
Special Meeting. See "The Merger Agreement--General"
and "--Effective Time of the Merger."
Conditions to
Consummation of the
Merger..................
The respective obligations of the Company, on the one
hand, and Gold Kist, on the other hand, to consummate
the Merger are subject to the satisfaction or waiver
at or prior to the Effective Time of the following
conditions, among others: (i) approval and adoption
of the Merger Agreement and the Merger by a majority
of the outstanding Voting Shares at the Special
Meeting; (ii) approval and adoption of the Merger
Agreement and the Merger by a majority of Voting
Shares held by the Minority Shareholders at the
Special Meeting; (iii) the absence of any statute,
rule, injunction or similar order prohibiting or
restricting the consummation of the Merger; (iv) the
receipt of all other required authorizations,
consents and approvals of governmental authorities;
(v) the material compliance by all parties with their
obligations under the Merger Agreement; (vi) the
material truth and correctness of all representations
and warranties of the parties to the Merger
Agreement; and (vii) Robinson-Humphrey shall not have
withdrawn its written fairness opinion. The
obligations of Gold Kist are further subject to: (i)
there not having occurred any material adverse change
in the business, condition (financial or otherwise)
or results of operations of the Company, and (ii)
SunTrust not having withdrawn its written fairness
opinion. See "The Merger Agreement--Conditions to
Consummation of the Merger."
Termination of the The Merger Agreement may be terminated and the Merger
Merger.................. may be abandoned at any time prior to the Effective
Time (notwithstanding approval of the Merger
Agreement by the shareholders of the Company): (i) by
mutual written consent of the Company and Gold Kist;
(ii) by either the Company or Gold Kist, if the
Merger has not been consummated by September 30,
1997; (iii) by either the Company or Gold Kist, if
there shall be any law or regulation that makes
consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or
decree enjoining Gold Kist or the Company from
consummating the Merger is entered and becomes final
and nonappealable; or (iv) by Gold Kist or the
Company (such determination to be made on behalf of
the Company by the Special Committee in its sole
discretion), if the Board of Directors of the Company
or the Special Committee withdraws, modifies or
changes its recommendation of the Merger Agreement or
the Merger in a manner adverse to Gold Kist or its
subsidiaries or resolves to do any of the foregoing
or the Board of Directors of the Company or the
Special Committee recommends to the shareholders of
the Company any Competing Transaction, as defined
herein under "The Merger
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<PAGE>
Agreement--Other Potential Bidders," or resolves to
do so. See "The Merger Agreement--Termination."
Expenses ............... Generally, all expenses incurred in connection with
the Merger are to be borne by the party incurring
such expenses. Gold Kist and the Company have agreed
to share equally the filing, printing and
distribution costs associated with this Proxy
Statement. See "The Merger Agreement--Expenses."
Amendments to the
Merger Agreement........
The Merger Agreement may not be amended prior to the
Effective Time except by action of the Company and
Gold Kist set forth in a written instrument signed on
behalf of each of the parties; provided that any such
amendment by the Company must be approved by the
Board of Directors of the Company, acting on the
recommendation of the Special Committee. After
approval of the Merger Agreement by the shareholders
of the Company at the Special Meeting and without the
further approval of such shareholders, no amendment
to the Merger Agreement may be made which will change
(i) the Merger Consideration or (ii) any other terms
and conditions of the Merger Agreement if any of such
changes would adversely affect the shareholders of
the Company. See "The Merger Agreement--Amendments."
Dissenters' Rights ..... Holders of Common Stock entitled to vote on approval
of the Merger Agreement have the right to dissent
from the Merger and, upon consummation of the Merger
and the satisfaction of certain specified procedures
and conditions, to receive the fair value of such
holders' shares of the Company in cash in accordance
with the applicable provisions of the GBCC. The
procedures to be followed by dissenting shareholders
are summarized under "Dissenters' Rights" and the
applicable provisions of the GBCC are reproduced as
Exhibit B, "Article 13 of the Georgia Business
Corporation Code."
Source of Funds ........ The total amount of cash required by Gold Kist to pay
the Merger Consideration and to pay its fees and
expenses in connection with the Merger is expected to
be approximately $ million. These funds will be
provided out of Gold Kist's cash balances and/or
borrowed under existing lines of credit. See "Source
of Funds for the Merger."
6
<PAGE>
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Gold Kist, through its wholly owned subsidiary, Agri, is the beneficial
owner of an aggregate of approximately 75% of the outstanding Voting Shares
and is deemed to control the Company. When the Company became publicly owned
by means of its initial public offering in September 1986, Gold Kist, which
prior to such time had been the sole beneficial owner of the Company's
securities, maintained a majority interest. Since such time, Gold Kist has
acquired additional shares of Common Stock from time to time in open market
transactions and through private purchases from certain affiliates.
In January 1993, certain member patrons of Gold Kist filed a lawsuit against
the Company and Gold Kist and certain Directors and officers of Gold Kist and
the Company. The lawsuit, Windham v. Chitwood (Cir. Ct. Ala. CV 93-00298) (the
"Windham Lawsuit"), alleged that the defendants violated their fiduciary
duties by diverting corporate opportunities from Gold Kist to the Company and
Carolina Golden Products Company ("Carolina Golden"), a partnership owned by
the Company and Gold Kist, in connection with the creation of the Company and
Carolina Golden and by permitting their continued operations. In a Final
Judgment and Decree issued in September 1996, Gold Kist was directed to
acquire the Company's Common Stock held by any current officers or Directors
of Gold Kist and their spouses and minor children at a price of $13.00 per
share. In addition, among other things, the Court ordered Gold Kist to cause
the surrender of all Golden Poultry stock options held by Gold Kist officers
and directors or the exercise of such options and purchase by Gold Kist of the
resultant stock. Between December 17, 1996 and January 9, 1997, Gold Kist made
such purchases.
In January 1997, the Board of Directors of Gold Kist discussed with their
financial and legal advisors two alternative methods for a transaction in
which Gold Kist could acquire the publicly held Common Stock in the Company:
(i) a cash merger and (ii) a cash tender offer followed by a cash merger. On
January 13, 1997, the Board of Directors of Gold Kist agreed to enter
negotiations with the Company to seek to acquire the outstanding shares of
Common Stock not already owned by Gold Kist in the simplest possible
transaction and determined that the Merger offered the most efficient and
effective means of documenting and executing the transaction. This
determination was based on the timing, procedures and financing required to
complete the transaction. On January 23, 1997, Gold Kist filed a Schedule 13D
pursuant to Rule 13d-1 of the Exchange Act (the "Schedule 13D") reporting the
purchase of shares from officers and directors as described above and stating
that the Board had authorized the officers of Gold Kist to negotiate with the
Company to pursue a transaction in which Gold Kist would acquire all of the
shares of the Common Stock not currently owned by Gold Kist, so that the
Company would become a wholly owned subsidiary of Gold Kist. At a regular
meeting of the Board of Directors of the Company on January 23, 1997, such
Board of Directors formed the Special Committee, consisting of Messrs. J.W.
McIntyre, H.R. Holding and J.H. Levergood, three members of the Board who are
not employed by the Company or Gold Kist, to negotiate with Gold Kist and its
representatives.
Upon the formation of the Special Committee, the Company and Gold Kist
issued the following joint press release:
"FOR IMMEDIATE RELEASE:
GOLD KIST AND GOLDEN POULTRY
BEGIN MERGER DISCUSSIONS
Atlanta, GA, January 23, 1997--Gold Kist Inc. began discussions with a
committee of independent directors appointed today by the board of Golden
Poultry Company, Inc., (NASDAQ:CHIK) about a possible merger of Golden
Poultry with a subsidiary of Gold Kist.
Gold Kist currently owns approximately 10,900,000, or 75%, of Golden
Poultry's total of 14,624,000 shares of common stock outstanding.
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<PAGE>
On January 13, 1997, the Gold Kist board authorized management to enter
negotiations with Golden Poultry that could result in the acquisition,
through a subsidiary, of the Golden Poultry shares it did not currently
own, according to Gaylord O. Coan, Gold Kist chief executive officer and
chairman of its management committee. Results of the negotiations with the
Golden Poultry committee must be submitted to the Gold Kist Board for its
final decision about completing the transaction, Coan said. The Gold Kist
board indicated that, if the acquisition is completed, the former Golden
Poultry facilities would become cooperative operations.
Golden Poultry operates divisions in Georgia, Alabama and North Carolina.
Fiscal 1996 sales were $600.2 million, including sales of Carolina Golden
Products Company at Sumter, SC. Golden Poultry owns 51% of Carolina Golden
in a joint venture partnership with Gold Kist.
Gold Kist is a diversified agricultural cooperative, based in Atlanta,
GA, which serves approximately 30,000 members. Fiscal 1996 sales were
approximately $2.0 billion. Gold Kist supplies farmers and agricultural
products dealers in the Southeast, Midsouth and Southwest and purchases
grain and other agricultural products for its own use and for sale to
further processors. Its poultry operations are located in Georgia, Alabama
and Florida."
Shortly after its formation, the Special Committee retained Sutherland,
Asbill & Brennan, L.L.P. ("SA&B") as its legal counsel. Thereafter, the
Special Committee and its legal counsel discussed the procedures to be
followed in receiving and analyzing an offer from Gold Kist to acquire the
minority shares of the Company. During February 1997, the Special Committee
requested four nationally recognized investment banking firms to make a
proposal to serve as financial advisor to the Special Committee. The Special
Committee received written proposals from the four investment banking firms
contacted and the members of the Special Committee communicated regarding the
content of those proposals. After an initial review and discussion, the
Special Committee invited two firms to make presentations to the Special
Committee at its first meeting in Atlanta, Georgia on February 26, 1997.
The Special Committee met on February 26, 1997 for purposes of receiving
legal advice as to its duties and selecting a financial advisor. After
receiving presentations by the two invited firms and discussing the merits of
each candidate, the Special Committee unanimously selected Robinson-Humphrey
as its financial advisor to conduct valuation analyses of the minority shares
for the purpose of advising the Special Committee in respect of the Merger
Consideration to be offered by Gold Kist. Prior to its retention by the
Special Committee, Robinson-Humphrey had not rendered financial advisory or
underwriting services to Gold Kist, the Company, or any of their affiliates.
The Special Committee continued its meeting on February 26 with Robinson-
Humphrey to discuss the anticipated timing of future events, and instructed
Robinson-Humphrey to commence its investigation and analysis of the value of
the Company's minority shares. The Special Committee discussed with Robinson-
Humphrey the possibility of other strategic alternatives to a transaction with
Gold Kist, but given Gold Kist's ownership of approximately 75% of the
outstanding Common Stock, ultimately concluded that finding an alternative
acquirer was unlikely, and that an all cash transaction proposed by Gold Kist,
provided an acceptable price could be achieved, would be the best option for
the Company and the Minority Shareholders.
During late February and early March 1997, Robinson-Humphrey reviewed
certain financial and other information concerning Gold Kist and the Company,
and spent several days on site at the Company's headquarters offices in
Atlanta. On March 10, 1997, Robinson-Humphrey met with the Special Committee
and representatives of SA&B to discuss the results of its preliminary analyses
and to obtain further direction from the Special Committee as to the validity
of the valuation methodologies employed by Robinson-Humphrey. Representatives
of Robinson-Humphrey discussed with the Special Committee the preliminary
analyses they had performed to produce a range of implied values for the
Company's minority shares. The Special Committee also discussed with Robinson-
Humphrey its findings in connection with its investigation of the Company and
questioned Robinson-Humphrey concerning the assumptions made in connection
with its analyses and the facts on which these analyses were based. Robinson-
Humphrey explained to the Special Committee the assumptions and relative
limits of its analyses. Robinson-Humphrey also confirmed to the Special
Committee that the
8
<PAGE>
Company did not have a long-term forecast of future performance. For purposes
of its preliminary discounted cash flow analysis, Robinson-Humphrey prepared
an extended forecast based on the three-year forecast prepared for the
Company's internal use and management assumptions. In connection with its
representation, Robinson-Humphrey did not, and was not requested by the
Special Committee to, make any recommendation as to the form or specific
amount of consideration to be paid by Gold Kist.
Following Robinson-Humphrey's presentation, the Special Committee asked
Robinson-Humphrey to provide advice as to how the Special Committee should
prioritize the various valuation methodologies applied by Robinson-Humphrey.
Robinson-Humphrey advised the Special Committee that all of such valuations
should be considered together (with particular attention to be paid to
Robinson-Humphrey's discounted cash flow analysis, "going private" acquisition
premium analysis and processing capacity analysis) in evaluating the fairness
of any proposed merger price offered by Gold Kist. Robinson-Humphrey also
noted that it was not possible to develop a useful comparable company
acquisition valuation analysis because there was not a representative number
of recent acquisition transactions involving companies engaged in wholesale-
oriented commodity food products businesses, as is the Company. Historically,
these companies have lower profit margins, returns on equity, earnings
predictability and valuation multiples than other food products companies that
are more retail/consumer oriented. The Special Committee authorized Robinson-
Humphrey to continue refining its analyses and determined that it would be
appropriate for the Special Committee to receive an initial price offer from
Gold Kist rather than to initiate negotiations by proposing a price to be
offered by Gold Kist for the Company's minority shares.
On February 20, 1997, Gold Kist retained SunTrust to serve as its financial
advisor. SunTrust's banking affiliate is one of Gold Kist's primary lenders,
and Gold Kist selected SunTrust to assist in this transaction in consideration
of (i) Gold Kist's long-standing relationship with the SunTrust organization,
which has allowed SunTrust to become familiar with Gold Kist and the Company,
and (ii) SunTrust's expertise and experience in rendering fairness opinions.
During late February and early March 1997, SunTrust reviewed certain financial
and other information concerning Gold Kist and the Company and performed such
analyses as it deemed appropriate.
On March 13, 1997, Alston & Bird LLP ("A&B"), legal counsel to Gold Kist,
provided SA&B with a draft merger agreement with respect to a proposed merger
transaction.
On March 14, 1997, the Board of Directors of Gold Kist met with
representatives of SunTrust, at which time such representatives discussed
their preliminary findings as to a range of values for the Company's minority
shares. The SunTrust representatives reviewed with the Board three valuation
methods they had used, including replacement cost valuation, capacity
valuation and discounted cash flow valuation. SunTrust also discussed
information it had compiled regarding valuation multiples for other publicly
traded companies in similar industries, and it provided the Board with
historical information regarding the premiums that had been paid in similar
transactions where minority interests of publicly traded companies had been
purchased. The Board of Directors and SunTrust discussed how the market price
of the Common Stock had increased since the announcement of the negotiations
on January 23, 1997, and the Board considered that the range of premiums that
had been paid in other "going private" transactions, if they were to be
instructive in the decisionmaking, should be applied to the price of the
Common Stock not including this announcement effect. Based upon the
information and analyses presented by SunTrust and the ensuing discussions,
the Board concluded that a price of $13.00 per share was reasonable, both in
terms of fairness to the cooperative members of Gold Kist and to the Minority
Shareholders of the Company. The Board also considered as an important element
in this decision that the shares of Common Stock purchased from the Gold Kist
officers and directors in December 1996 and January 1997 were purchased at
$13.00 per share.
On March 14, Gaylord Coan, Chief Executive Officer of Gold Kist and Vice
Chairman of the Company, and Jack Lawing, General Counsel to both Gold Kist
and the Company, called John McIntyre, Chairman of the Special Committee, and
communicated to Mr. McIntyre Gold Kist's offer of $13.00 in cash per share for
the minority interest in the Company, on the terms set forth in the draft
merger agreement provided by A&B to SA&B. At that time, Mr. McIntyre indicated
to Mr. Coan that he would take the $13.00 price to the Special Committee, but
that he did not believe this price would be acceptable to the committee.
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On March 17, 1997, Mr. Coan and the representatives from SunTrust telephoned
Robinson-Humphrey and proposed a meeting to further discuss the $13.00 per
share offer and their analyses in reaching such amount.
The Special Committee met on March 18 to discuss the offer made by Gold Kist
and the Special Committee's response. Representatives of Robinson-Humphrey
indicated to the Special Committee that they had been contacted by
representatives of SunTrust, who had proposed a meeting between the two firms
to discuss their respective valuation analyses. Robinson-Humphrey responded to
SunTrust at that time that it could only meet with SunTrust and discuss its
analyses at such time as it was authorized to do so by the Special Committee.
The Special Committee members, together with Robinson-Humphrey and SA&B,
discussed the price offered by Gold Kist and a response to that offer.
Robinson-Humphrey confirmed that its valuation analyses presented at the
Special Committee's March 10 meeting remained valid and substantially
unchanged. Robinson-Humphrey advised the Special Committee that the $13.00 per
share offered by Gold Kist did not, in Robinson-Humphrey's opinion, give
appropriate emphasis to valuation factors considered by it to be most relevant
(the discounted cash flow analysis, "going private" acquisition premium
analysis and processing capacity analysis). Robinson-Humphrey stated that it
did not believe it would be able to render a fairness opinion as to the
proposed $13.00 price. The Special Committee members noted that $13.00 was the
same price at which shares of certain officers and directors of the Company
were purchased in settlement of the Windham Lawsuit, which the Special
Committee believed to be below the range of prices currently justifiable as
fair to the Minority Shareholders. Because the Special Committee viewed the
$13.00 per share price as below the range of prices that would be acceptable
to the Special Committee, the Special Committee concluded that it would be
inappropriate to respond with a specific price counteroffer to the Gold Kist
proposal. Instead, the Special Committee concluded that it would be advisable
for Robinson-Humphrey to meet with SunTrust to discuss SunTrust's analyses
from which they derived a $13.00 price, and to discuss with SunTrust Robinson-
Humphrey's analyses in support of a higher price.
With respect to the proposed merger agreement, SA&B identified a number of
issues to be resolved in connection with finalizing that agreement. In
particular, SA&B noted that the draft merger agreement did not contain a
condition to the Company's obligation to consummate the merger that a majority
of the minority shares approve the merger transaction. The Special Committee
determined that such a condition would be advantageous because it would
confirm approval by the Minority Shareholders themselves of the price offered
for their shares.
Representatives of Robinson-Humphrey met with representatives of SunTrust on
March 20, 1997 to discuss their respective valuation analyses. The firms
fundamentally agreed as to several methods of valuation, but differed as to
the outcome of these valuation methodologies. At the meeting, Robinson-
Humphrey informed SunTrust that it could not provide a counteroffer to the
$13.00 price proposed by Gold Kist for the Company's minority shares. Instead,
Robinson-Humphrey specified three alternatives: first, SunTrust could work
with Gold Kist and respond to the Special Committee with an increased offered
price per share for the Company's minority interest; second, SunTrust and
Robinson-Humphrey could meet again for purposes of further discussion of their
respective valuation analyses; third, the parties could terminate discussions,
with Gold Kist proceeding however it saw fit.
Also on March 20, 1997, representatives of SA&B met with representatives of
A&B to discuss the proposed draft merger agreement. At that meeting, counsel
for the Special Committee and Gold Kist were able to resolve a substantial
number of disputed points in the agreement. Several significant issues
remained, the most substantial of which was the Special Committee's proposal
that the transaction be approved by a majority of the minority shares, as to
which A&B could not indicate Gold Kist's agreement.
On March 21, 1997, representatives of SunTrust and Robinson-Humphrey had a
telephone conversation during which they discussed valuation issues. During
the period March 22-25, 1997, SunTrust had various conversations with Mr. Coan
for the purpose of updating him on the status of the discussion with Robinson-
Humphrey and to discuss further the reaction of the market price of the Common
Stock to the announcement of negotiations.
10
<PAGE>
The Special Committee met again on March 25, 1997. Representatives of
Robinson-Humphrey reported back to the committee concerning the results of
their meeting with SunTrust, and representatives of SA&B reported as to their
meeting with A&B. The Special Committee concluded that it would be preferable
to wait for Gold Kist to revise its offered price, or to initiate another
response, rather than to propose a price or otherwise instigate further
negotiation at that time.
The following day, representatives of SunTrust informed Robinson-Humphrey
that SunTrust had no authority from Gold Kist to raise the $13.00 per share
offer initially communicated to Mr. McIntyre, nor was Gold Kist otherwise
willing to increase its offer beyond $13.00 at that time. SunTrust informed
Robinson-Humphrey that it was Gold Kist's desire that the Special Committee
respond with a counterproposal to the $13.00 initial offer. The Special
Committee met again on March 27, 1997 to discuss alternatives in light of
Robinson-Humphrey's recent communications from SunTrust. The Special Committee
discussed with Robinson-Humphrey the feasibility of making a counteroffer to
the $13.00 price offered by Gold Kist. Robinson-Humphrey confirmed to the
Special Committee that, under the valuation analyses deemed most relevant by
Robinson-Humphrey, implied values for the minority shares ranged from $14.00
to $16.00, while recognizing that other valuation analyses implied lower and
higher prices. Given that the initial offer by Gold Kist was below this range,
the committee concluded that it would still be preferable for Gold Kist to
make a higher offer before responding with a counteroffer. However, in the
interest of responding to Gold Kist's concerns, the Special Committee
concluded that, absent an increased price offer from Gold Kist, it would be
advisable for Mr. McIntyre and representatives of Robinson-Humphrey and SA&B
to meet with representatives of Gold Kist to communicate the methodologies
employed by Robinson-Humphrey, the Special Committee's views as to valuation,
and the resulting implied valuation ranges.
On April 1, 1997, Mr. McIntyre, together with representatives of Robinson-
Humphrey and SA&B, met with Mr. Coan, Mr. Lawing and John Bekkers, Chairman of
the Board of the Company and Chief Operating Officer of Gold Kist, and
representatives of SunTrust and A&B. At this meeting, the representatives of
Robinson-Humphrey communicated to Gold Kist and its advisors the results of
its valuation analyses which implied a value for the minority shares in excess
of the $13.00 price offered by Gold Kist. Mr. McIntyre, on behalf of the
Special Committee, reiterated to Gold Kist that the $13.00 price offer was not
acceptable to the Special Committee, and indicated to Mr. Coan that the
Special Committee would consider a higher offer from Gold Kist. Mr. Coan
informed Mr. McIntyre that Gold Kist believed the $13.00 price to be a fair
offer, and advised that his communications with several of the Company's
significant shareholders supported this belief. Further, Mr. Coan indicated
that Gold Kist did not have great flexibility to increase its offered price
significantly. Discussion ensued between Mr. McIntyre and Mr. Coan and their
respective financial advisors as to the fairness of the $13.00 per share price
offered by Gold Kist and whether Gold Kist was in a position to increase its
offer. Following that discussion, Mr. Coan indicated that Gold Kist might be
able to increase the price offered for the Company's minority shares to $14.00
per share, but that he would need approval of the Gold Kist Board of Directors
to do so. Mr. McIntyre responded that $14.00 would be considerably closer to
the range of prices considered acceptable by the Special Committee, and that
he would take that price to the Special Committee, in anticipation that the
Gold Kist Board would authorize the $14.00 price.
The Special Committee met with representatives of Robinson-Humphrey and SA&B
later in the day on April 1, 1997 to discuss the $14.00 price tentatively
offered by Gold Kist. Based on their experience with the Company, and the
analyses prepared by Robinson-Humphrey, the Special Committee considered the
price to be at the low end of acceptability. The Special Committee discussed
the ability of Gold Kist to increase its price, in particular based on the
views communicated to Mr. McIntyre as to Gold Kist's belief that $13.00 was a
fair price. Following discussion, the Special Committee determined that it
would be appropriate to counteroffer at $15.00 per share. Mr. McIntyre then
communicated the counteroffer of $15.00 to Mr. Coan, who agreed to take that
price to the Gold Kist Board of Directors.
The Board of Directors of Gold Kist met by telephone on April 2, 1997 to
discuss the Special Committee's proposal of $15.00. At this meeting, the Board
of Directors considered that initiating other alternatives to the merger would
involve some expense that would be duplicative of expenses already incurred in
negotiating the
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Merger, and that raising the offered price above $13.00 per share would be
appropriate. The Board concluded that $15.00 was unacceptable, but that $14.00
was within the ranges supported by the information and analyses provided by
SunTrust. The Board then directed Mr. Coan to reject the Special Committee's
counteroffer of $15.00 per share, and authorized him to counteroffer with
$14.00 per share. The Board instructed Mr. Coan that this counteroffer should
remain open until 12:00 p.m. on April 10.
Later that day, Mr. Coan informed Mr. McIntyre that the Gold Kist Board of
Directors had rejected the $15.00 per share price proposed by the Special
Committee, but that the Board had approved for Mr. Coan to counteroffer with
$14.00 per share as previously discussed, and that this counteroffer by Gold
Kist would remain open until April 10, 1997 at 12:00 p.m. Eastern time. Mr.
McIntyre advised Mr. Coan that if Gold Kist would increase its price so that
the Special Committee and Gold Kist could meet halfway between their
respective proposals, he would take that up with the Special Committee and
encourage its acceptance. Mr. McIntyre also indicated to Mr. Coan that he did
not believe that the Special Committee would accept a price of $14.00 per
share.
From April 2 through April 8, 1997, Mr. Coan had several telephone
conversations with SunTrust, in which they discussed other alternatives to the
Merger, in consideration that the Special Committee might not accept the
$14.00 price.
The Special Committee, together with representatives of Robinson-Humphrey
and SA&B, met on April 9, 1997 to discuss the status of the negotiations. The
Special Committee confirmed with Robinson-Humphrey that the $14.00 per share
price offered by Gold Kist was roughly at the bottom of the range of implied
values produced by the valuation analyses deemed most relevant by Robinson-
Humphrey. The Special Committee directed Mr. McIntyre to communicate with Mr.
Coan to renew the $15.00 per share offer. Mr. McIntyre communicated to Mr.
Coan the Special Committee's unwillingness to move from its $15.00 per share
proposal, but indicated the committee's willingness to consider a counteroffer
by Gold Kist.
On April 10, the Board of Gold Kist met again and approved increasing their
offer to $14.25. The Board believed, based on the prior communications with
the Special Committee, that this increase would cause the offered price to be
acceptable to the Special Committee. The Board considered that the
negotiations had seemed to reach an impasse, that initiating alternatives to
the Merger would result in duplicative costs, and that the $14.25 price
remained supportable as a fair price, based on the information and analyses
provided by SunTrust.
On April 10, 1997, Mr. Coan called Mr. McIntyre to inform him that Gold Kist
would increase its offer to $14.25, but that this was the highest price that
Gold Kist was prepared to offer. Mr. McIntyre indicated to Mr. Coan that the
Special Committee could only consider this price if approval of the
transaction by a majority of the minority shares was a condition to the
Company's obligation to consummate the Merger. Mr. Coan, after consulting with
counsel, confirmed to Mr. McIntyre that Gold Kist would be willing to make
approval by a majority of the minority shares a condition to the Company's
obligation to consummate the Merger.
The Special Committee, together with representatives of Robinson-Humphrey
and SA&B, met again on April 11, 1997 to discuss Gold Kist's latest proposal.
The Special Committee asked Robinson-Humphrey whether it would deliver a
fairness opinion at a price of $14.25 per share. Robinson-Humphrey indicated
that it would be willing to give an opinion that such amount was fair, from a
financial point of view, to the Minority Shareholders. After further
discussion, the Special Committee unanimously approved the Merger at the
$14.25 price, subject to including in the final merger agreement a condition
that the transaction be approved by a majority of the minority shares.
On April 11, 1997, following agreement in principle by the parties as to the
price of $14.25 per share, the Company and Gold Kist issued the following
joint press release:
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"FOR IMMEDIATE RELEASE:
GOLDEN POULTRY NEGOTIATING COMMITTEE ACCEPTS
$14.25 PER SHARE OFFER FROM GOLD KIST
Atlanta, GA, April 11, 1997--Gold Kist Inc. and Golden Poultry Company,
Inc. (NASDAQ:CHIK) today announced an agreement in principle that could
result in the purchase by Gold Kist of the Golden Poultry shares it does
not presently own.
A negotiating committee of independent directors of the board of Golden
Poultry and Gold Kist agreed on a price of $14.25 per share. Gold Kist owns
approximately 10,900,000, or 75 percent, of Golden Poultry's 14,624,000
shares of common stock outstanding, according to Gaylord O. Coan, Gold Kist
chief executive officer and chairman of its management committee.
Negotiations began in January 1997. The purchase is subject to approval
of a definitive agreement by the boards of directors of both companies and
by a majority of the owners of the Golden Poultry shares not owned by Gold
Kist. The acquisition will be accomplished in the form of a merger with a
Gold Kist subsidiary formed for this purpose and should be completed in
July 1997, Coan said.
Golden Poultry operates divisions in Georgia, Alabama and North Carolina.
Fiscal 1996 sales were $600 million, including sales of Carolina Golden
Products Company at Sumter, SC. Golden Poultry owns 51% of Carolina Golden
in a joint venture partnership with Gold Kist.
Gold Kist is a diversified agricultural cooperative, based in Atlanta,
GA, which serves approximately 30,000 members. Fiscal 1996 sales were
approximately $2 billion. Poultry operations in Georgia, Alabama and
Florida make it the second largest poultry processor in the United States.
It also operates 100 farm supply stores in the Southeast, Midsouth and
Southwest and is engaged in grain purchasing, plant breeding and seed
production, wholesale fertilizer and crop protection chemical sales, pet
food and animal products manufacturing and sales and other agricultural-
related businesses."
The Special Committee, without Mr. Levergood (who was out of the country at
the time, but who has joined in and ratified the action of the Special
Committee described below), met again on April 22, 1997 with the full Board of
Directors of the Company. At the April 22 meeting, the Special Committee and
the Board received a presentation from Robinson-Humphrey that the $14.25 price
offered to the Minority Shareholders pursuant to the Merger Agreement was
fair, from a financial point of view, to the Minority Shareholders. After
further discussion, the Special Committee concluded, based to a significant
degree on the opinion of Robinson-Humphrey and the other factors described
below under "--Recommendations of the Special Committee, the Board and Gold
Kist," that the terms of the Merger were fair to, and in the best interests
of, the Minority Shareholders and recommended that the Company's Board of
Directors (i) approve and adopt the Merger Agreement in the form presented to
the Special Committee, with such changes as are approved by Mr. McIntyre; (ii)
determine that the Merger is fair to, and in the best interests of, the
Minority Shareholders; and (iii) recommend that the shareholders approve the
Merger Agreement. The Board of Directors took such actions.
The Board of Directors of Gold Kist met on April 25, 1997 and received a
presentation from SunTrust that the $14.25 price offered to the Minority
Shareholders was fair, from a financial point of view, to the cooperative
members of Gold Kist. After further discussion, the Board concluded, based to
a significant degree on the opinion of SunTrust and the other factors set
forth below under "--Recommendation of the Special Committee, the Board and
Gold Kist," that the terms of the Merger and the Merger Agreement are fair to,
and in the best interests of, the members of Gold Kist and the Minority
Shareholders. The Board of Directors approved the Merger Agreement in the form
presented to the Board and ratified execution of the Merger Agreement by
officers of Gold Kist.
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A copy of the written materials provided by Robinson-Humphrey and
distributed to the Special Committee and the Board of Directors of the Company
at the April 22, 1997 meeting, and a copy of the written materials provided by
SunTrust and distributed to the Board of Directors of Gold Kist at the April
25, 1997 meeting have been filed as exhibits to the Schedule 13E-3 and are
available for inspection and copying at the principal executive offices of the
Company during its regular business hours by any shareholder or any
representative of a shareholder who has been so designated in writing. A copy
of such materials shall be provided to any shareholder or any representative
of a shareholder who has been so designated in writing upon written request
and at the expense of the requesting shareholder or representative.
RECOMMENDATIONS OF THE SPECIAL COMMITTEE, THE BOARD AND GOLD KIST
The Special Committee. At a meeting of the Special Committee on April 11,
1997, the Special Committee approved the Merger price of $14.25 in cash per
share. On April 22, 1997, following a presentation by Robinson-Humphrey to the
full Board of Directors as to its opinion that the offered price of $14.25 per
share, on the terms set forth in the Merger Agreement, was fair to the
Minority Shareholders from a financial point of view, the Special Committee
concluded the Merger and the Merger Consideration are fair to, and in the best
interests of, the Minority Shareholders and recommended to the Board of
Directors that it approve the Merger Agreement. Based in part on the
recommendation of the Special Committee and considering the written fairness
opinion received from Robinson-Humphrey, the Board of Directors of the
Company:
(i) determined that the Merger is fair to, and in the best interests of,
the Minority Shareholders;
(ii) approved and adopted the Merger Agreement and the transactions
contemplated thereby and authorized the execution, delivery and
performance thereof by the Company; and
(iii) resolved to recommend that the shareholders of the Company approve
the Merger Agreement and the transactions contemplated thereby.
The Board of the Directors of the Company believes that the terms of the
Merger Agreement are fair to, and in the best interests of, the Company and
the Minority Shareholders. In reaching its conclusion, the Board of Directors
of the Company adopted the recommendation of the Special Committee as set
forth below.
The Special Committee, in reaching its conclusion that the Merger is fair
to, and in the best interests of, the Minority Shareholders, and in
determining to recommend approval of the Merger Agreement and the Merger to
the Board of Directors of the Company, considered a number of factors,
including, without limitation:
1. The oral and written presentations of Robinson-Humphrey to the Special
Committee on March 10, 1997 and to the full Board of Directors of the
Company on April 22, 1997, and the written opinion of Robinson-Humphrey
dated April 22, 1997 to the effect that, as of the date of such opinion and
based upon and subject to certain matters stated in such opinion, the
Merger Consideration was fair, from a financial point of view, to the
Minority Shareholders. See "--Opinion of the Special Committee's Financial
Advisor." The opinion of Robinson-Humphrey is attached hereto as Exhibit C.
The Special Committee has adopted the analysis of Robinson-Humphrey as set
forth in its opinion dated April 22, 1997 and accompanying presentation
materials. The shareholders of the Company are urged to read such opinion
carefully in its entirety.
2. The Special Committee's conclusion that the Merger Consideration
represented the highest price that Gold Kist would be willing to pay in
acquiring the Common Stock held by the Minority Shareholders. This
determination was the result of the Special Committee's substantial
negotiations with Gold Kist in an attempt to obtain the highest possible
price.
3. The terms of the Merger Agreement, including without limitation, the
amount and form of consideration; the nature of the parties'
representations, warranties, covenants and agreements; and the conditions
to the obligations of Gold Kist and the Company. In this regard, the
Special Committee considered significant the requirement that the Merger be
approved by a majority of the shares held by the Minority Shareholders as a
condition to the Company's obligation to consummate the Merger.
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4. The possibility that, in the absence of a Merger Agreement, Gold Kist
could increase its ownership of the Common Stock in a transaction not
approved by the Company or the Special Committee.
5. The fact that the Merger Consideration represented (i) a 23.9% premium
over the last reported sales price of the Common Stock on January 22, 1997,
the day immediately preceding the public announcement of negotiations
between Gold Kist and the Company with respect to a possible merger of the
Company with a subsidiary of Gold Kist; (ii) a 29.5% premium over the last
reported sales price of the Common Stock on January 15, 1997, the day one
week preceding the announcement of the negotiations; and (iii) a 42.5%
premium over the last reported sales price of the Common Stock on January
22, 1996, the day one year prior to the announcement of the negotiations.
The Special Committee also noted that the Merger Consideration represented
an 11.8% premium over the last reported sales price of the Common Stock on
April 10, 1997, the day immediately preceding the announcement of the
$14.25 price agreed to by the Special Committee and Gold Kist.
6. The Special Committee's knowledge of the business, financial
condition, results of operations and prospects of the Company.
7. The historical trading prices of the Common Stock and the limited
trading volume and market for the Common Stock, resulting in limited
liquidity for the Minority Shareholders.
8. The availability of dissenters' rights to the Minority Shareholders
who do not vote for approval of the Merger Agreement and perfect such
rights under the applicable provisions of the GBCC. See "Dissenters'
Rights."
In view of the number and disparate nature of the factors considered by the
Special Committee, the Special Committee did not assign relative weights to
the factors considered in reaching its conclusions. The Special Committee did,
however, rely significantly on the presentations and opinion of Robinson-
Humphrey described in paragraph 1 above and gave particular consideration to
the value of the minority shares implied by Robinson-Humphrey's (i) discounted
cash flow analyses (which the Special Committee believed to be approximately
$13.00 to $16.00 per share) (ii) "going private" acquisition premium analysis
(which the Special Committee believed to be approximately $13.50 to $14.00 per
share) and (iii) processing capacity analysis (which the Special Committee
believed to be approximately $14.71 per share).
The members of the Special Committee (as well as the other directors of the
Company) are indemnified by the Company under the Company's Bylaws and the
applicable provisions of the GBCC, and are exculpated from certain liabilities
under the Company's Articles of Incorporation, with respect to their actions
in connection with the Merger. The members of the Special Committee are also
covered by directors and officers liability insurance maintained by the
Company. As compensation for their service on the Special Committee, the
Company has agreed to pay each member of the Special Committee $1,000 for each
meeting held by the Special Committee, plus an additional $500 each to Messrs.
Holding and Levergood. Messrs. Holding and Levergood are each entitled to
reimbursement for expenses incurred by them in connection with their service
on the Special Committee. Mr. McIntyre is not entitled to reimbursement for
expenses, but has been paid an additional fee of $7,500 to cover his expenses
and additional time spent in service of the Special Committee in his role as
Chairman of the Special Committee. Such compensation is in addition to the
compensation payable to all directors of the Company, including the directors
comprising the Special Committee.
The Board of Directors. The Board of Directors of the Company has concluded
that the Merger and the Merger Consideration are fair to the Minority
Shareholders and recommends that the shareholders vote in favor of the Merger
based upon the following factors: (i) the conclusions of the Special
Committee; (ii) the opinion of the Special Committee's financial advisor,
Robinson-Humphrey, to the effect that the $14.25 per share of Common Stock to
be received in the Merger is fair from a financial point of view to the
Minority Shareholders, and (iii) the factors referred to above as having been
taken into account by the Special Committee, which the Board of Directors
adopts as its own. In view of the wide variety of factors considered in
connection with its evaluation of the Merger and the Merger Consideration, the
Board of Directors did not find it practicable to
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assign relative weights to the factors considered in reaching its decision
and, therefore, the Board of Directors did not quantify or otherwise attach
relative weights to the specific factors considered by the Board.
In its analysis, the Board of Directors recognized that the interests of
Gold Kist in the Merger are not the same as the interests of the other holders
of Common Stock in the Merger. As a result of such differing interests, the
Special Committee recognized the importance of seeking the approval of the
majority of Voting Shares held by the Minority Shareholders for the Merger
Agreement and the Merger, and the Board of Directors considered this an
important element in approving the Merger Agreement. Because Georgia law
requires a merger agreement to be approved by a majority of the members of a
Georgia corporation's board of directors, individuals who have relationships
with Gold Kist who serve on the Board of Directors, including Messrs. P.J.
Gibbons, J.L. Stewart, G.O. Coan, K.N. Whitmire and J. Bekkers, participated
in the Board's vote to approve the Merger Agreement and recommend it to the
Company's shareholders. See "Special Factors--Interests of Certain Persons in
the Merger; Certain Relationships" and "--Opinion of the Special Committee's
Financial Advisor."
Gold Kist. The Gold Kist Board of Directors has concluded that the Merger
and the Merger Consideration are fair to the Minority Shareholders and to the
cooperative members of Gold Kist based upon the following factors: (i) the
conclusions and recommendations of the Special Committee and the Company's
Board of Directors; (ii) information provided to and discussed with Gold Kist
in connection with the valuation analyses performed by Gold Kist's financial
advisor, SunTrust; (iii) the fact that the Merger Consideration and the other
terms and conditions of the Merger Agreement were the result of arms' length
good faith negotiations between the Special Committee and its advisors and the
representatives of Gold Kist and its advisors; (iv) the fact that Robinson-
Humphrey issued a fairness opinion to the Special Committee to the effect that
the Merger is fair from a financial point of view to the Minority
Shareholders; and (v) the other factors referred to above as having been taken
into account by the Special Committee and the Company's Board of Directors,
which the Board of Directors of Gold Kist adopts as its own (see "Special
Factors--Background of the Merger" and "--Report of Financial Adviser of Gold
Kist").
In view of the wide variety of factors considered in connection with its
evaluation of the Merger and the Merger Consideration, the Gold Kist Board of
Directors did not find it practicable to assign relative weights to the
factors considered in reaching their decision and, therefore, the members of
the Gold Kist Board did not quantify or otherwise attach relative weights to
the specific factors considered by the Special Committee and the Company's
Board of Directors. The members of the Board of Directors of Gold Kist
recognized that the interests of Gold Kist in the Merger are not the same as
the interests of the Minority Shareholders in the Merger. See "Special
Factors--Interests of Certain Persons in the Merger; Certain Relationships."
OPINION OF THE SPECIAL COMMITTEE'S FINANCIAL ADVISOR
On April 22, 1997, Robinson-Humphrey delivered its written opinion to the
Special Committee and the Board of Directors of the Company that as of the
date of such opinion the Merger Consideration was fair to the Minority
Shareholders from a financial point of view. That opinion was reaffirmed as of
the date of this Proxy Statement.
The full text of the opinion of Robinson-Humphrey, which sets forth
assumptions made, matters considered and limitations on the review undertaken
in connection with the opinion, is attached hereto as Exhibit C. Shareholders
are urged to read the opinion in its entirety. Robinson-Humphrey's opinion is
directed only to the consideration to be received by the Minority Shareholders
in the Merger and does not constitute a recommendation to any shareholder as
to how such shareholder should vote. Robinson-Humphrey's opinion does not
address the likely tax consequences of the Merger to any Minority Shareholder.
No limitations were imposed by the Special Committee, the Company or Gold Kist
with respect to the investigations made or procedures followed by Robinson-
Humphrey in rendering its opinion. Robinson-Humphrey conducted valuation
analyses of the Common Stock and evaluated the Merger Consideration, but was
not asked to and did not recommend a specific per share price to be paid by
Gold Kist for the minority interest in the Company. The summary of the opinion
of Robinson-Humphrey set forth in this Proxy Statement is qualified in its
entirety by reference to the full text of such opinion.
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In connection with its opinion, Robinson-Humphrey conducted, among other
analyses, (a) a review of the industry and the competitive climate in which
the Company operates, and its competitive position therein; (b) a review of
the business, historical financial performance and prospects of the Company;
(c) a review of the historical and current market prices and trading patterns
of the Common Stock; (d) an analysis of the Merger Consideration in relation
to the market prices of securities of, and financial data of, other companies
engaged in similar businesses as the Company; (e) a review and analysis of
prices and premiums paid in, and other terms of, other recent "going private"
acquisition transactions; (f) a discounted cash flow analysis of the Company;
and (g) a review and analysis of consideration paid for capacity additions in
the industry. Robinson-Humphrey also held discussions with members of the
senior management of the Company regarding the Company's past and current
business operations, financial condition and future prospects.
Robinson-Humphrey relied without independent verification upon the accuracy
and completeness of all of the financial and other information reviewed by it
for purposes of its opinion. In that regard, with respect to the Company's
internal financial forecasts, which the Special Committee instructed Robinson-
Humphrey to use for purposes of its analyses, Robinson-Humphrey assumed that
such forecasts were reasonably prepared on a basis reflecting the best
currently available estimates and judgments of the Company's senior management
as to the future financial performance of the Company. In addition, Robinson-
Humphrey was not requested or authorized to solicit, and did not solicit,
interest from any party with respect to an acquisition of all or any portion
of the outstanding Common Stock, the Company or its constituent businesses.
Finally, Robinson-Humphrey has been informed by Gold Kist, and has relied with
the Special Committee's permission on such information, that Gold Kist does
not currently intend to pursue a sale or recapitalization of the Company or
its subsidiaries after consummating the Merger pursuant to the Merger
Agreement.
The following is a summary of the presentation by Robinson-Humphrey to the
Board of Directors of the Company (including a majority of the members of the
Special Committee) on April 22, 1997 in connection with its April 22, 1997
fairness opinion:
Analysis of Golden Poultry
Historical Stock Price Analysis. Robinson-Humphrey analyzed the prices at
which shares of the Company traded over the last three years. In calendar
1994, the high price was $8.00 and the low price was $5.63. In calendar 1995,
the high price was $9.00 and the low price was $5.50. In calendar 1996, the
high price was $12.25 and the low price was $8.25. In calendar 1997, as of
April 22, 1997, the high price was $13.50 and the low price was $10.50.
Additionally, Robinson-Humphrey observed that the $14.25 per share Merger
Consideration is greater than any historical trade of the Company's Common
Stock.
Valuation Summary of Selected Comparable Publicly Traded Companies.
Robinson-Humphrey reviewed and compared certain financial, operating and stock
market information of the Company and the following publicly traded companies
in the poultry processing industry: Cagle's, Inc., Hudson Foods, Inc.,
Pilgrims Pride Corporation, Sanderson Farms, Inc., Seaboard Corp., Tyson
Foods, Inc., and WLR Foods, Inc. (the "Comparable Companies"). Robinson-
Humphrey calculated, among other things, current market price as a multiple of
book value and as a multiple of estimated earnings per share ("EPS") for
calendar years 1997 and 1998. The EPS estimates were based on the mean of
publicly available earnings estimates made by research analysts as provided by
First Call Investor Service. Additionally, Robinson-Humphrey compared the
Comparable Companies' market capitalization plus debt minus cash and cash
equivalents ("Firm Value") as a multiple of projected 1997 earnings before
interest, taxes, depreciation and amortization ("EBITDA"). In order to
accurately reflect average values for statistical purposes, Robinson-Humphrey
did not consider values in the average that deviated significantly from median
values.
With respect to the Comparable Companies, the estimated calendar year 1997
and 1998 price/earnings ("P/E") ratios ranged from 8.7x to 16.2x for estimated
calendar year 1997, with an average of 12.1x, and 9.2x to 14.4x for estimated
calendar year 1998, with an average of 11.8x. Based on the Merger
Consideration of $14.25 and using earnings values for the Company based on
financial forecasts prepared by Robinson-Humphrey
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from information provided by the Company's management, Robinson-Humphrey
calculated a multiple for the Company of 18.1x for calendar year 1997 and
10.8x for calendar year 1998. Robinson-Humphrey noted that the 1997 multiple
was significantly above the multiple of the Comparable Companies and the 1998
multiple was only slightly below the multiples of the Comparable Companies.
Robinson-Humphrey also considered the current market value to book value
multiples of the Comparable Companies, which ranged from values of 1.04x to
2.73x, with an average of 1.6x. Robinson-Humphrey noted that the Merger
Consideration implied a multiple of 1.88x, which was above the average
multiple of the Comparable Companies.
Finally, with respect to the Comparable Companies, Robinson-Humphrey
compared Firm Value to projected 1997 EBITDA and computed ratios ranging from
5.2x to 7.9x, with an average of 6.6x. The Merger Consideration in this
transaction implied a multiple of 6.9x, which was above the average multiple
of the Comparable Companies.
Discounted Cash Flow Analysis. Robinson-Humphrey performed a discounted cash
flow analysis using financial forecasts prepared by Robinson-Humphrey with the
assistance of the Company's management. Using the discounted cash flow
analysis, Robinson-Humphrey estimated the present value of the future cash
flows set forth in these forecasts. Robinson-Humphrey calculated a net present
value of free cash flows (defined as earnings before interest after taxes plus
depreciation and amortization less capital expenditures and any increase in
net working capital) for the years 1997 through 2001 using discount rates
ranging from 11% to 16%. Robinson-Humphrey calculated the Company's terminal
values in the year 2001 based on multiples of year 2001 projected earnings
before interest and taxes ("EBIT") with a midpoint of 8.0x and ranging from
6.5x to 9.5x, as well as the Company's terminal values in the year 2001 based
on multiples of year 2001 projected EBITDA, with a midpoint of 6.0x and
ranging from 4.5x to 7.5x. Robinson-Humphrey observed that the valuation based
on EBIT produced a midpoint per share equity value of $14.59 and the valuation
based on EBITDA produced a midpoint value of $14.85, each of which was higher
than the Merger price of $14.25. Robinson-Humphrey also calculated the
Company's terminal value in the year 2001 based on the present value of future
cash flows and assuming growth rates with a midpoint of 4.0%, ranging from
3.0% to 5.0%. Calculating the value of these discounted free cash flows and
subtracting the net debt of the Company yielded an implied equity value range
per share of the Common Stock from approximately $13 to $16, with a midpoint
of $14.02. Robinson-Humphrey noted that the Terminal Free Cash Flow
methodology implied that the $14.25 Merger Consideration was higher in value
than the midpoint of the range determined by Robinson-Humphrey.
Minority Interest Buy Out Analysis. Robinson-Humphrey prepared an analysis
of the premiums paid in 21 completed minority interest acquisitions by
majority interest holders occurring since January 1994. Robinson-Humphrey
considered, among other factors, the percentage of the target's shares held by
the acquirer at the time of the announcement, and the premiums paid based on
the closing price of the target's shares at one day, one week and four weeks
prior to the announcement. Robinson-Humphrey calculated median premiums of
21.4%, 24.7%, and 34.9% at one day, one week, and four weeks prior to
announcement, respectively. These premiums, based upon the announcement date
of January 23, imply per share equity values for the Company of $13.51,
$13.56, and $14.84 respectively.
Adjusted Book Value Analysis. Robinson-Humphrey considered the book value
per share of the Company and compared this to the Merger Consideration.
Robinson-Humphrey noted that the Company's assets had been depreciated rapidly
over time and believed that in order to value properly the assets, it was
appropriate to consider the true economic value of the assets by adjusting the
assets for previous depreciation. This analysis resulted in book values
ranging from $11.16 to $14.76 after adding back 50% to 100% of accumulated
depreciation, respectively. Robinson-Humphrey noted that the Merger
Consideration of $14.25 was higher than the average adjusted book value of
$12.96.
Chicken Processing Capacity Analysis. Robinson-Humphrey conducted an
analysis of investments in chicken processing capacity in seven transactions
within the industry. Of these seven transactions, four were
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made by the Company for capacity additions, specifically: the Russellville,
Alabama plant original purchase, the Russellville plant addition, the Sumter,
South Carolina plant purchase, and the Siler City, North Carolina plant
purchase. One transaction was an unsuccessful bid to Campbell Soup by the
Company for its Douglas, Georgia plant. The remaining two transactions were
Tyson Food's purchase of certain Cargill and McCarty Farms' facilities and
Sanderson Farms' investment in a new plant. These transactions reflect the
capital expenditures or investments that the Company and other poultry
processors were willing to make in order to expand capacity, which Robinson-
Humphrey deemed relevant for purposes of considering the value attributable to
the Company as a poultry processor. Based on the consideration paid and the
additional capacity realized, these transactions resulted in a range of $34.38
per 1,000 chickens processed per week to $87.50 per 1,000 chickens processed
per week with a median of $56.52 per 1,000 chickens processed per week. This
implies a per share equity value of $14.71 for the Company's 4,200,000 heads
per week capacity.
Summary
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analysis or of the summary set forth above, without
considering the analysis as a whole, could create an incomplete view of the
processes underlying Robinson-Humphrey's opinion. In arriving at its fairness
determination, Robinson-Humphrey considered the results of all such analyses.
Robinson-Humphrey did not separately consider the extent to which any one of
the analyses supported or did not support the Robinson-Humphrey fairness
opinion. No company or transaction used in the above analyses as a comparison
is identical to the Company or Gold Kist or the contemplated Merger. The
analyses were prepared solely for purposes of Robinson-Humphrey providing its
opinion to the Special Committee as to the fairness of the $14.25 per share
Merger Consideration to be received by the Minority Shareholders in the Merger
and do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts
of future results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested by such
analyses. Because such analyses are inherently subject to uncertainty, being
based upon numerous factors or events beyond the control of the parties or
their respective advisors, none of the Company, Gold Kist, Robinson-Humphrey
or any other person assumes responsibility if future results are materially
different from those forecast.
As described above, Robinson-Humphrey's opinion to the Special Committee was
one of many factors taken into consideration by the Special Committee in
making its determination to approve the Merger Agreement. The foregoing
summary does not purport to be a complete description of the analysis
performed by Robinson-Humphrey and is qualified by reference to the written
opinion of Robinson-Humphrey set forth in Exhibit C hereto.
Robinson-Humphrey, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements, and other valuation services. The Special
Committee selected Robinson-Humphrey as financial advisor to the Special
Committee because it is a nationally recognized investment banking firm that
has substantial experience in transactions similar to the Merger. As
compensation for its services, the Company has paid Robinson-Humphrey a total
fee of $250,000. In addition, the Company agreed to reimburse Robinson-
Humphrey for its reasonable out-of-pocket expenses and to indemnify Robinson-
Humphrey against certain liabilities arising out of its engagement. Neither
Gold Kist, Agri, Merger Sub, nor the Company had an existing relationship with
Robinson-Humphrey prior to consideration of Robinson-Humphrey's retention.
REPORT OF FINANCIAL ADVISOR OF GOLD KIST
On April 25, 1997, SunTrust delivered its oral opinion to the Gold Kist
Board of Directors to the effect that, as of such date, based upon the
assumptions made, the matters considered, and the limitations on the review
undertaken, the Merger Consideration to be paid by Gold Kist was fair to the
cooperative members of Gold Kist from a financial point of view. As of the
date of this proxy statement, SunTrust has delivered its written opinion
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(the "SunTrust Opinion") to the Board of Directors of Gold Kist to the effect
that, as of such date, based upon the assumptions made, the matters considered
and the limitations on the review undertaken, the Merger Consideration to be
paid by Gold Kist was fair to the cooperative members of Gold Kist from a
financial point of view.
In rendering its opinion, SunTrust, among other things, (i) conducted
interviews with the Company's management concerning the Company's historical
operating experience and future prospects, (ii) visited the Company's
processing facilities, and (iii) performed various valuation analyses using
generally accepted methodologies, including (a) an evaluation of the Company's
industry, including its historical performance, competitive environment, and
future prospects; (b) an analysis of the replacement cost of the Company's
assets; (c) an analysis of the Company's assets based on processing capacity;
(d) an analysis of the value of the Company based on the present value of its
future cash flows; (e) an analysis of the public trading multiples of
comparable companies; (f) an analysis of premiums paid in transactions
involving the acquisition of a remaining minority interest by a majority
owner; and (h) an analysis of premiums paid in transactions involving the
acquisition of a remaining minority interest by a majority owner through a
tender offer.
In the course of its review, SunTrust relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information provided by the Company's management. Further, SunTrust
relied upon the assurances of the Company's management that they are unaware
of any facts that would make the information provided to SunTrust incomplete
or misleading.
The SunTrust Opinion does not address the relative merits of the Merger as
compared to any other business plan or opportunity that might be presented to
Gold Kist, or the effect of any other arrangement in which Gold Kist might
engage.
In arriving at the SunTrust Opinion, SunTrust considered certain financial
analyses. In connection with its presentation to the Gold Kist Board of
Directors, SunTrust has provided the Gold Kist Board of Directors with a
summary of valuation results obtained by using several different valuation
methods as well as other material concerning the Merger, the material portions
of which are summarized below.
Replacement Cost Analysis. SunTrust analyzed the value of each of the
processing assets based on estimated replacement cost. The analysis considered
the maximum broiler processing capacity of each of the Company's plants on a
per week and per year basis and applied an estimate of the cost to replace
that capacity. The replacement cost of each facility, which were provided by
the Company, included the construction of a hatchery, feedmill, and processing
plant. On a per share basis, this analysis indicated an equity value of $19.26
per share of the Company's Common Stock.
Capacity Analysis. SunTrust analyzed the value of the Company's processing
assets based on the capacity available at each of the Company's plants. This
analysis considered the capacity utilization constraints, live bird weight
experience, and processing yields for each plant in order to arrive at an
estimate of the maximum ready to cook ("RTC") pounds that could be produced by
each respective plant. A range of values, on an RTC pounds basis, was then
applied to each plant's indicated RTC pounds capacity to estimate plant value.
The values per RTC pound employed in the analysis were $.20, $.25, and $.30
per annual RTC poundage capacity, which yielded equity values of $14.71,
$19.39, and $24.06, respectively, on a per share basis, for the processing
assets owned by the Company.
Discounted Cash Flow Analysis. SunTrust performed a discounted cash flow
analysis based on forecasts that were generated with the assistance of the
Company's management. The forecasts projected the Company's financial
performance over the five year period from 1997 to 2001. SunTrust estimated
the value of the Company by calculating the present value of the free cash
flows that were projected to be generated during the forecast period and
adding to that the present value of the terminal value in 2001. Free cash
flows are calculated as earnings before interest less applicable taxes plus
depreciation and amortization less required capital expenditures and additions
to working capital. The terminal value is calculated using the perpetuity
method and uses after-tax operating profits. Per share values calculated using
the discounted cash flow analysis ranged from $8.75 to $14.97.
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Valuation Multiples for Publicly Traded Poultry Companies. SunTrust
conducted an analysis of valuation multiples for publicly traded poultry
companies including WLR Foods, Inc., Hudson Foods, Inc., Sanderson Farms,
Inc., Tyson Foods, Inc., and Pilgrims Pride Corporation, and compared those
multiples to the Company. The analysis calculated the enterprise value,
defined as market capitalization plus net debt, as a multiple of sales, EBIT,
EBITDA, book value, and total assets for each company for the latest twelve
months of operations. In addition, current and projected P/E ratios for each
company were reviewed.
With respect to sales, the enterprise value multiples ranged from .31x to
.70x with an average of .52x; the EBIT multiples calculated ranged from 14.67x
to 39.68x with an average of 21.86x; the EBITDA multiples ranged from 8.30x to
11.62x with an average of 9.33x; book value multiples ranged from 1.77x to
3.08x with an average of 2.49x; and, multiples based on total assets ranged
from .73x to 1.33x with an average of .95x.
Projected P/E ratios, based on IBES, Inc. 1997 earnings forecasts ranged
from 8.48 to 17.34 with an average of 12.31.
The average multiple for the comparable companies was then applied to sales,
EBIT, EBITDA, book value and total asset figures for the Company in order to
arrive at an enterprise value for the Company. The calculated enterprise
values were adjusted by debt attributable to the Company in order to arrive at
an equity value. On a per share basis, the values ranged from $11.12 to
$22.07.
Acquisitions of Remaining Minority Interest. SunTrust conducted a study of
premiums paid in transactions involving the acquisition of a remaining
minority interest by a majority interest holder that were announced between
January 1, 1995 and February 28, 1997. The analysis included a review of the
pre-acquisition ownership percentage as well as the premiums paid in the
transaction versus the target's stock price five days and thirty days prior to
the announcement. The premiums calculated ranged from (1.64%) to 123.40% for
the five day period and from (3.23%) to 138.33% for the thirty day period.
Average premiums of 28.8% and 37.5% were calculated for the five and thirty
day periods, respectively. The Merger Consideration represents premiums of
31.0% and 53.0%, respectively, for the five and thirty day periods prior to
the filing of the Schedule 13D on January 23, 1997 by Gold Kist. Additionally,
the Merger Consideration represents a premium of 21.3% and 16.3%,
respectively, for the five and thirty day periods prior to the announcement of
an agreement in principle between Gold Kist and the Company concerning the
Merger on April 11, 1997.
Tender Offer Premium Study. SunTrust conducted a study of premiums paid in
transactions involving the acquisition of a remaining minority interest
through a tender offer that were announced between January 1, 1991 and March
31, 1997. The analysis included a review of the pre-acquisition ownership
percentage as well as the premiums paid in the transaction versus the target's
stock price one day, five days, and thirty days prior to the announcement. The
premiums calculated ranged from 2.6% to 120.0% for the one day period, from
(8.3%) to 95.6% for the five day period, and from (12.2%) to 106.9% for the
thirty day period. Average premiums of 32.3%, 35.9%, and 36.7%, respectively,
were calculated. The Merger Consideration represents premiums of 35.7%, 31.0%
and 53.0%, respectively, for the one, five and thirty day periods prior to the
filing of the Schedule 13D on January 23, 1997 by Gold Kist.
The summary set forth above does not purport to be a complete description of
the analyses performed by SunTrust. Arriving at a fairness opinion is a
complex process not necessarily susceptible to partial or summary description.
SunTrust believes that its analysis must be considered in its entirety and
that selecting portions of its analyses and of the factors considered by it,
without considering all such factors and analyses, could create a misleading
view of the process underlying its analyses set forth in the SunTrust Opinion.
SunTrust's fairness opinion is necessarily based upon financial, economic,
market and other conditions as they exist, and the information made available
to it, as of the date of such opinion. SunTrust disclaims any undertaking or
obligation to advise any person of any change in any fact or matter affecting
the SunTrust Opinion. Furthermore, SunTrust's fairness opinion is directed to
the Board of Directors of Gold Kist and relates solely to the fairness, from a
financial point of view, to the cooperative members of Gold Kist.
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The Gold Kist Board of Directors selected SunTrust to act as its financial
advisor on the basis of SunTrust's reputation and expertise in transactions
similar to the Merger and because it is familiar with Gold Kist and its
business. As part of its investment banking business, SunTrust is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions. SunTrust has rendered from time to time various
investment banking and financial advisory services to Gold Kist.
With respect to SunTrust's services as financial advisor in connection with
the Merger, Gold Kist has agreed to pay SunTrust a cash fee equal to $300,000.
In addition, Gold Kist also agreed to reimburse SunTrust for its reasonable
out-of-pocket expenses (including reasonable fees and expenses of its legal
counsel) and to indemnify SunTrust against certain liabilities arising out of
its engagement.
PURPOSE AND STRUCTURE OF THE MERGER
Gold Kist formed the Company in 1982 and subsequently sold a minority
portion of the Company's Common Stock publicly, in order to obtain outside
equity investments in the Company so that Gold Kist's investment in the
Company would provide additional financial support for Gold Kist's cooperative
operations. The Board of Directors of Gold Kist has determined that the
Company is no longer needed to serve this purpose. In addition, the Board
believes that the Company should be operated as a cooperative, which is
consistent with Gold Kist's operating philosophy, and which would extend the
advantages of a cooperative to the producers who supply the Company by
allowing them to become member patrons.
In January 1993, certain member patrons of Gold Kist filed the Windham
Lawsuit, alleging that the named defendants violated their fiduciary duties by
diverting corporate opportunities from Gold Kist to the Company and Carolina
Golden in connection with the creation of the Company and Carolina Golden
Products Company and by permitting their continued operations. Although
initially required to do so by the Alabama court, in the final resolution of
the lawsuit in 1996, Gold Kist was not directed to acquire all of the
outstanding Common Stock held by the Minority Shareholders. However, the Gold
Kist Board of Directors included on the agenda of its regularly scheduled
meeting on January 13, 1997 the question of undertaking to acquire such Common
Stock. At that meeting, the Board of Directors determined that taking such
action would (i) simplify Gold Kist's corporate structure by eliminating the
need to consider public shareholders, (ii) permit Gold Kist to convert the
Company's operations to a cooperative which, as mentioned above, could benefit
producers, and (iii) eliminate the potential conflicts of interests that might
arise between Gold Kist's obligations to its member patrons and the Company's
obligations to its public shareholders.
The Merger has been structured so as to enable Gold Kist (through Agri) to
acquire the entire equity interest in the Company not already owned by Gold
Kist while maximizing shareholder value for the Company's Minority
Shareholders. The Merger will terminate the equity interest in the Company of
the Company's shareholders other than Gold Kist. Accordingly, the Company's
Minority Shareholders will share in neither future earnings and growth of the
Company nor the risks associated with achieving such earnings and growth
following the Merger. The Merger will enable the Company's Minority
Shareholders to receive a cash payment of $14.25 per share of Common Stock
pursuant to a transaction which has been determined by the Special Committee
and the Boards of Directors of the Company and Gold Kist as discussed above to
be fair to such shareholders, or to seek dissenters' rights as described under
"Dissenters' Rights." The Merger Consideration was the result of arms' length
negotiations between representatives of Gold Kist and the Special Committee
and their respective advisors following a proposal by Gold Kist. See "--
Opinion of the Special Committee's Financial Advisor," and "--Report of the
Financial Advisor of Gold Kist." Following the Merger, Gold Kist will be the
sole beneficiary of any future earnings and growth of the Company and will
have the ability to benefit from any corporate opportunities that may be
pursued by the Company in the future.
Pursuant to the Merger Agreement, upon consummation of the Merger, Merger
Sub will merge into the Company, with the Company being the Surviving
Corporation. Each outstanding share of Common Stock (except those shares of
Common Stock held by the Company as treasury shares, beneficially owned by
Gold Kist or owned by shareholders who perfect their dissenters' rights under
the GBCC) will be converted into the right to
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receive $14.25 in cash, without interest. Each outstanding share of Common
Stock owned beneficially by Gold Kist or held by the Company as treasury
shares will be canceled without consideration. Each outstanding share of
Merger Sub common stock (all of which shares are beneficially owned by Gold
Kist) will be converted into one share of common stock of the Surviving
Corporation.
Pursuant to the GBCC, approval of the Merger Agreement requires the
affirmative vote of the holders of a majority of the outstanding Voting
Shares. Gold Kist beneficially owns 10,901,802 Voting Shares (representing
approximately 75% of the Voting Shares outstanding) and has agreed to vote all
of such shares in favor of the Merger Agreement, thereby assuring satisfaction
of this approval requirement under the GBCC. However, pursuant to the Merger
Agreement, approval also requires the affirmative vote of a majority of the
outstanding Voting Shares held by the Minority Shareholders. See
"Introduction--Voting Rights; Vote Required for Approval."
Holders of Common Stock have the right to demand appraisal of, and obtain
payment for, the "fair value" of their shares by following the procedures
prescribed in Article 13 of the GBCC, a copy of which is included as Exhibit B
to this Proxy Statement, and which is summarized under "Dissenters' Rights" in
this Proxy Statement. A shareholder's failure to take any of the steps
required under Article 13 on a timely basis could result in the loss of such
rights.
PLANS FOR THE COMPANY AFTER THE MERGER
Pursuant to the terms of the Merger Agreement, the Directors of Merger Sub
at the Effective Time of the Merger shall be the Directors of the Surviving
Corporation and the officers of the Company at the Effective Time shall be the
officers of the Surviving Corporation after the Merger. See "Directors and
Executive Officers of the Company, Gold Kist, Merger Sub and the Surviving
Corporation--Information Concerning Directors and Executive Officers of the
Surviving Corporation." The Merger Agreement also provides that the Articles
of Incorporation and Bylaws of the Company shall remain as the Articles of
Incorporation and Bylaws of the Surviving Corporation.
After the Merger, Gold Kist may liquidate the Company as part of converting
it into a cooperative operation. However, the Gold Kist Board of Directors has
reserved the right to make its final decision about the method of converting
the Company to a cooperative until after the Merger has been completed.
Otherwise, Gold Kist has formulated no plans or proposals regarding activities
or transactions which are to occur after the Merger that would relate to or
would result in an extraordinary transaction involving the Company.
CERTAIN EFFECTS OF THE MERGER
Upon consummation of the Merger, each share of Common Stock, other than
shares held by the Company as treasury shares, shares beneficially owned by
Gold Kist and shares as to which dissenters' rights have been perfected in
accordance with GBCC, will be converted into the right to receive the Merger
Consideration. As a result, the present holders of the Common Stock, including
officers and directors of the Company who are beneficial owners of Common
Stock (but not including Gold Kist), will cease to have any ownership interest
in the Company. The Company will as a result of the Merger become an indirect
wholly owned subsidiary of Gold Kist. The Common Stock will be delisted from
the Nasdaq Stock Market's National Market, the registration of Common Stock
under the Exchange Act will terminate, the Company will be relieved of the
obligation to comply with the proxy rules of Regulation 14A under Section 14
of the Exchange Act, and its officers, directors and beneficial owners of more
than 10% of the Common Stock will be relieved of the reporting requirements
and restrictions on insider trading under Section 16 of the Exchange Act.
Further, the Company will no longer be subject to the periodic reporting
requirements of the Exchange Act, and will not be required to file, among
other things, quarterly reports on Form 10-Q and annual reports on Form 10-K.
Accordingly, substantially less information will be required to be made
publicly available about the Company than is currently the case.
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Immediately after the Merger, all of the then outstanding Common Stock will
be beneficially owned by Gold Kist. Accordingly, Gold Kist's indirect interest
in the assets and liabilities of the Company, including the net book value and
net earnings of the Company, will increase, upon effectiveness of the Merger,
from 75% to 100%. See "Special Factors--Purpose and Structure of the Merger"
which describes certain other effects of the Merger. The Merger will be a
taxable transaction to the holders of the Common Stock who receive Merger
Consideration for federal income tax purposes and may be taxable for state,
local, foreign and other tax purposes. See "Special Factors--Certain Federal
Income Tax Consequences of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; CERTAIN RELATIONSHIPS
Merger Sub was organized by Gold Kist solely for the purpose of enabling
Gold Kist to acquire, pursuant to the Merger Agreement, the entire equity
interest in the Company. As a result of the Merger, the current shareholders
of the Company other than Gold Kist will no longer have an equity interest in
the Company. See "Special Factors--Certain Effects of the Merger." Gold Kist
is the beneficial owner of 10,901,802 shares or approximately 75% of the
outstanding shares of Common Stock of the Company.
Except for Directors Holding, Levergood, Gaston, McIntyre and Sands, and
executive officers E. C. Ragans, S. L. Prince, N. R. Robinson and D. W. Mabe,
all directors and executive officers of the Company served as executive
officers or employees of Gold Kist during the fiscal year ended June 29, 1996.
As of the date hereof, the Directors and executive officers of the Company
beneficially own an aggregate of 285,989, or approximately 1.91% of the
outstanding shares of Common Stock of the Company, including 110,811 shares
which are issuable pursuant to currently exercisable stock options. Such
Directors and executive officers of the Company will receive the Merger
Consideration for the outstanding shares of Common Stock beneficially owned by
such individuals, including shares issuable pursuant to currently exercisable
stock options. No current Director or officer of Gold Kist owns any shares of
the Company's Common Stock.
The Board of Directors of the Company has determined that, in the event that
the Merger is consummated, the Company shall pay the sum of $10,345 to each of
its Directors who is not an employee of the Company, Gold Kist or any other
affiliate of Gold Kist, including Messrs. H. O. Chitwood, W. W. Gaston, H. R.
Holding, J. H. Levergood, J. W. McIntyre, and D. W. Sands. This amount is in
lieu of the annual retainer fee of 726 shares of Common Stock that each such
Director would have received at the Company's annual meeting following the end
of the current fiscal year, as payment for such Director's services during the
current fiscal year.
In addition, the Merger Agreement provides that Gold Kist will continue to
fulfill its obligations under certain split dollar life insurance agreements
entered into with Directors Gaston, Holding, McIntyre and Sands. Each of these
Directors, by virtue of such position with the Company, was entitled to and,
other than Mr. Levergood, did enter into an agreement with Gold Kist pursuant
to which Gold Kist has agreed to assist such person in providing death
benefits for his beneficiaries. These agreements require Gold Kist to provide
such assistance for each Director for a period of 15 years, and they permit
Gold Kist, in its sole and absolute discretion, to continue providing such
assistance after the individual is no longer serving as a Director of the
Company or any other affiliate of Gold Kist. The Merger Agreement requires
that Gold Kist will continue the split dollar life insurance agreement with
each such Director for the originally agreed upon term of 15 years. Generally,
the split dollar life insurance agreements require Gold Kist to pay certain
annual life insurance premiums on behalf of the individual Director, with Gold
Kist having the right to receive the amount of such premiums from the cash
surrender value of or the death benefits paid pursuant to the life insurance
policy.
In the Merger Agreement, Gold Kist has agreed that all rights to
indemnification arising at or prior to the Effective Time in favor of the
directors or officers of the Company (including the members of the Special
Committee) as provided in the Company's articles of incorporation or bylaws,
as in effect on the date of the Merger Agreement, and in director and officer
liability insurance currently in effect and covering officers and directors of
the Company, will, for a period of six years after the Effective Time, with
respect to matters occurring at or prior to the Effective Time, survive the
Merger and continue in full force and effect. See "The Merger Agreement--
Covenants."
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Effective January 1991, the Company became a 51% general partner in Carolina
Golden, under a general partnership agreement with AgriGolden, Inc., a wholly
owned subsidiary of Gold Kist, which is the 49% partner. Carolina Golden
operates a poultry processing complex located in Sumter, South Carolina for
the production of value added and further processed poultry products.
Gold Kist provides certain administrative, staff and operating functions for
the Company pursuant to management services agreements with the Company and
Carolina Golden which are renewable annually. Under the agreements, Gold Kist
provides a broad range of corporate functions and services. The areas of
service include:
(1) accounting, auditing and financial reporting, consultation and
services;
(2) purchasing and distribution;
(3) marketing and advertising;
(4) poultry feed manufacturing and consultation services;
(5) engineering services;
(6) information systems processing and consultation;
(7) research, quality assurance, veterinary and technical services;
(8) corporate protection and risk management services;
(9) real estate and corporate planning services;
(10) human resources management;
(11) communications and government and public relations; and
(12) credit services.
For such services, the Company pays to Gold Kist (a) an annual sum equal to
Gold Kist's budgeted costs in providing these services, plus (b) 5.8% of the
Company's earnings before income taxes assuming a Company return on assets
employed ("ROAE") of more than 10%, or 3.5% of the Company's earnings before
income taxes assuming a positive Company ROAE of less than 10%. The actual
amount under (a) to be paid annually by the Company is adjusted by settlement
at the end of each year based upon Gold Kist's actual costs in providing the
services and includes the allocated portion of the salaries and benefits of
Gold Kist officers and employees who also serve as Company Directors and
executive officers. The incentive amounts based on earnings before income
taxes have been provided for in order to fairly compensate Gold Kist for
rendering services and contributing to positive Company results.
For the fiscal year ended June 29, 1996, the payments made by the Company to
Gold Kist totaled $7,713,000, which reflected payments for actual costs of
$6,230,000 and incentive payments of $1,483,000. The budgeted annual cost
amount for fiscal year 1997, exclusive of the incentive amounts based on
earnings before income taxes, is $6,800,000.
Additionally, the Company and Gold Kist are parties to certain other
agreements as follows:
(1) A trademark license agreement with a remaining term of six years,
under which the Company is granted the non-exclusive right to Gold Kist's
registered trademarks "Gold Kist Farms"(R), "Young 'n Tender"(R) and "The
Chicken Worth Asking For By Name"(R), for a royalty of $5,000 per year. The
Company also has the right to use certain of Gold Kist's other trademarks,
including "Early Bird"(R), for a royalty of $100 per year under an
agreement terminable on 30 days' notice.
(2) A lease agreement whereby the Company leased from Gold Kist
refrigerated storage space in Durham, North Carolina, on a depreciation and
maintenance basis. The amount paid to Gold Kist pursuant to this agreement
for the past fiscal year was $19,200.
(3) A broker agreement whereby Gold Kist serves as broker for certain of
the Company's poultry products, including further processed poultry
products. The amount paid by the Company to Gold Kist pursuant to this
agreement for the past fiscal year was $58,000.
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(4) An export services agreement under which Gold Kist provides certain
managing, staffing and support activities required for the export of
Company products into foreign markets and assists the Company with the
transactional activities attendant to such export sales. The Company did
not pay any amounts to Gold Kist pursuant to this agreement for the past
fiscal year.
(5) A commission and representative agreement executed between the
Company and GKX, Inc., a foreign sales corporation which is a majority
owned subsidiary of Gold Kist, under which GKX, Inc. serves as a commission
agent for the Company in connection with the export sale of Company
products into foreign countries. No amounts were paid to GKX, Inc. pursuant
to this agreement for the past fiscal year. The Company owns 100% of the
Class B Common Stock of GKX. Profits earned by GKX applicable to sales of
Company products are paid to the Company in the form of dividends on this
stock.
(6) An agreement between the Company and AgraTrade Financing, Inc., a
wholly owned subsidiary of Gold Kist, under which AgraTrade Financing, Inc.
provides mortgage loans or leases to independent contractor poultry growers
recommended by the Company to finance the growers' construction of poultry
houses. The Company has agreed to bear up to 50% of any credit losses on
these loans and leases. As of June 29, 1996, there was approximately $28.0
million in loans by the Company or leases outstanding, and there have been
no credit losses on any of the loans or leases guaranteed under this
Agreement, which has been in effect since October 1988.
(7) A cooperative marketing agreement between Gold Kist and Carolina
Golden under which Carolina Golden supplies a significant portion of its
further processed chicken products to Gold Kist at values which approximate
market and is allocated a pro rata portion of the earnings or losses, if
any, realized in the cooperative marketing of such products by Gold Kist.
The amount of product supplied by Carolina Golden to Gold Kist pursuant to
this agreement during the past fiscal year was $127.7 million.
(8) GK Finance Corporation, a wholly owned subsidiary of Gold Kist,
provides to Carolina Golden a revolving credit facility with advances up to
$15.0 million. At June 29, 1996, there were no amounts outstanding under
the revolving credit facility. During the fiscal year ended June 29, 1996,
Carolina Golden paid GK Finance Corporation interest on these credit
facilities in the amount of $1.1 million.
(9) In 1996, as a result of its focus on male broilers, the Company
entered into an agreement with Gold Kist to exchange certain of the
Company's female broilers for certain male chicks from Gold Kist. To
compensate Gold Kist for certain sexing, transportation and growout related
costs associated with the exchange agreement, the Company agreed to pay
Gold Kist a premium of $0.0415 per chick. The Company believes the total
annual premium related to such costs is expected to be approximately $1.4
million per year. In addition, as an inducement to Gold Kist to enter into
the arrangement, at the end of each profitable fiscal year, the Company
agreed to pay Gold Kist a rebate equal to $0.005 for each chick exchanged
during that fiscal year. The Company believes such rebate is to be
approximately $150,000 per year.
It is the intention of management that all transactions with affiliated
parties will be on terms no less favorable to the Company than could be
obtained from unaffiliated parties, and all such transactions with affiliates
have been approved by the Company's directors who are not employed by the
Company or Gold Kist.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The receipt of cash for Common Stock pursuant to the Merger will be a
taxable transaction for federal income tax purposes under the Code, and also
may be a taxable transaction under applicable state, local, foreign and other
tax laws.
In general, a shareholder will recognize gain or loss equal to the
difference between the tax basis for the Common Stock held by such shareholder
and the amount of cash received in exchange therefor. Such gain or loss will
be capital gain or loss if the shares of Common Stock are capital assets in
the hands of the shareholder and will be a long-term capital gain or loss if
the holding period for the Common Stock is more than one year. Long-term
capital gains recognized in 1997 by shareholders who are individuals are
taxable at a maximum rate
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of 28% (as compared with a maximum rate of 39.6% on ordinary income).
Corporations generally are subject to tax at a maximum rate of 35% on both
capital gains and ordinary income. The distinction between capital gain and
ordinary income may be relevant for certain other purposes, including the
taxpayer's ability to utilize capital loss carryovers to offset any gain
recognized.
The foregoing discussion may not be applicable to shareholders who acquired
their Common Stock pursuant to the exercise of options or other compensation
arrangements or who are not citizens or residents of the United States or who
are otherwise subject to special tax treatment under the Code.
THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
MERGER IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED ON EXISTING TAX
LAW AS OF THE DATE OF THIS PROXY STATEMENT, WHICH MAY DIFFER ON THE DATE OF
THE CONSUMMATION OF THE MERGER OR AT THE EFFECTIVE TIME. EACH SHAREHOLDER IS
URGED TO CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR TO DETERMINE THE
PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE MERGER, INCLUDING THE
APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT OF THE MERGER
The Merger will be accounted for as a "purchase" as that term is used under
generally accepted accounting principles for accounting and financial
reporting purposes. Under this method of accounting, the purchase price will
be allocated to assets acquired and liabilities assumed based on their
estimated fair values at the Effective Time.
CERTAIN LITIGATION
The Company is also party to various legal and administrative proceedings,
all of which management believes constitute ordinary routine litigation
incident to the business conducted by the Company, or are not material in
amount.
REGULATORY APPROVALS
No federal or state regulatory approvals are required to be obtained, nor
any regulatory requirements complied with, in connection with consummation of
the Merger by any party to the Merger Agreement, except for the requirements
of the GBCC in connection with shareholder approvals and consummation of the
Merger, and the requirements of federal securities law.
THE MERGER AGREEMENT
GENERAL
The Merger Agreement provides for the merger of Merger Sub into the Company.
The Company will be the Surviving Corporation of the Merger and, as a result
of the Merger, Gold Kist will beneficially own all of the Surviving
Corporation's common stock. In the Merger, the shareholders of the Company,
other than Gold Kist and shareholders who perfect their dissenters' rights
under the GBCC, will receive the Merger Consideration described below. See
"Special Factors--Purpose and Structure of the Merger."
EFFECTIVE TIME OF THE MERGER
The Effective Time of the Merger will occur upon the filing of a certificate
of merger with the Secretary of State of the State of Georgia as required by
the GBCC or at such later time as is specified in the certificate of merger.
It is anticipated that the certificate of merger will be filed as promptly as
practicable after approval of the Merger Agreement by the shareholders of the
Company at the Special Meeting. Such filing will be made,
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however, only upon satisfaction or waiver of all conditions to the Merger
contained in the Merger Agreement. The following discussion of the Merger
Agreement is qualified in its entirety by reference to the complete text of
the Merger Agreement, which is included in this Proxy Statement as Exhibit A
and is incorporated herein by reference.
THE SURVIVING CORPORATION
The Merger Agreement provides that, at the Effective Time, the persons
identified herein under "Directors and Executive Officers of the Company, Gold
Kist, Merger Sub and the Surviving Corporation--Information Concerning
Directors and Executive Officers of the Surviving Corporation" will become
officers and directors of the Surviving Corporation and the Surviving
Corporation will adopt as its Articles of Incorporation and bylaws the
Articles of Incorporation and bylaws of the Company.
CONSIDERATION TO BE RECEIVED BY SHAREHOLDERS OF THE COMPANY
As a result of the Merger, each outstanding share of Common Stock (except
shares held by the Company as treasury stock, shares beneficially owned by
Gold Kist and shares owned by shareholders who perfect their dissenters'
rights under the GBCC) will be converted into the right to receive the Merger
Consideration of $14.25 in cash, without interest. Each share of Common Stock
owned by Gold Kist or held by the Company as treasury stock will be canceled
without consideration.
Each of the outstanding shares of common stock, no par value, of Merger Sub
will automatically be converted into one share of common stock, no par value,
of the Surviving Corporation.
If the Merger is consummated, instructions with regard to the surrender of
certificates formerly representing shares of Common Stock, together with the
letter of transmittal to be used for that purpose, will be mailed to
shareholders as soon as practicable after the Effective Time. The Exchange
Agent (as defined in the Merger Agreement), as soon as practicable following
receipt from a shareholder of a duly executed letter of transmittal, together
with certificates formerly representing Common Stock and any other items
required by the letter of transmittal, shall pay to such shareholder the
Merger Consideration. If payment is to be made to a person other than the
person in whose name the certificate surrendered is registered, it will be a
condition of payment that the certificate so surrendered be properly endorsed
or otherwise in proper form for transfer and that the person requesting such
payment pay to the Exchange Agent any transfer or other taxes required by
reason of such payment or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not applicable.
SHAREHOLDERS SHOULD NOT SUBMIT ANY STOCK CERTIFICATES FOR COMMON STOCK AT
THE PRESENT TIME.
If the Merger is consummated, after the Effective Time a holder of a
certificate formerly representing Common Stock shall cease to have any rights
as a shareholder of the Company, and such holder's sole right will be to
receive the Merger Consideration to which such holder is entitled, or in the
case of a shareholder exercising dissenters' rights under Article 13 of the
GBCC, the fair value of such shareholder's shares determined in accordance
with the provisions of the GBCC.
In no event will holders of Common Stock be entitled to receive any interest
on the Merger Consideration to be distributed to them in connection with the
Merger.
Any funds remaining with the Exchange Agent one year following the Effective
Time shall be delivered to Gold Kist within one week after the end of such one
year period, without further action or request, and any holder who has not
exchanged Common Stock for the Merger Consideration prior to that time shall
thereafter look only to Gold Kist for payment of the Merger Consideration in
respect of such holder's Common Stock. Notwithstanding the foregoing, neither
Gold Kist nor the Surviving Corporation shall be liable to any holder of
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Common Stock for any amount paid to a public official pursuant to applicable
abandoned property laws. Any amounts remaining unclaimed by holders of Common
Stock two years after the Effective Time (or such earlier date immediately
prior to such time as such amounts would otherwise escheat to or become
property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of Gold Kist free and clear of any claims
or interest of any person previously entitled thereto.
No transfer of shares outstanding immediately prior to the Effective Time
will be made on the stock transfer books of the Surviving Corporation after
the Effective Time. Certificates formerly representing Common Stock presented
to the Surviving Corporation after the Effective Time will be canceled in
exchange for the Merger Consideration.
OPTIONS
The Company and Gold Kist have agreed to take all steps reasonably necessary
such that, pursuant to Section 7.1 of the Company's 1988 Long-Term Incentive
Plan (the "Incentive Plan"), the Company shall give written notice to the
holders of all options ("Options") granted under the Incentive Plan that were
outstanding on the date of the Merger Agreement that (i) such Options shall be
exercisable in full on a date that is at least thirty days prior to the date
on which the Effective Time is expected to occur, and (ii) that all Options
that are not exercised during such thirty-day period will terminate. In
addition, the written notice to each such holder shall include an offer by
Gold Kist to pay for the cancellation of such holder's Options an amount in
cash determined by multiplying (a) the excess, if any, of the Merger
Consideration over the applicable exercise price per share of the Option by
(b) the number of shares of Common Stock such holder could have purchased had
such holder exercised such Option in full immediately prior to the Effective
Time, and each such Option shall thereafter be canceled.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of the
Company, Gold Kist, Agri and Merger Sub relating to, among other things, the
following matters (which representations and warranties are subject, in
certain cases, to specified exceptions and, generally, apply only to facts and
circumstances existing as of the date of the Merger Agreement): (a) due
incorporation, corporate existence, good standing and similar corporate
matters with respect to each of the Company, Gold Kist, Agri and Merger Sub;
(b) corporate power and authority to enter into, and the valid and binding
execution and delivery of, the Merger Agreement by each such party; (c) the
absence of any governmental authorization, consent, or approval required to
consummate the Merger, except as disclosed; (d) the Merger Agreement and the
Merger not resulting in contraventions or conflicts with respect to the
Articles of Incorporation or bylaws and violations of laws, regulations,
judgments, injunctions, orders or decrees relating to the Company and its
subsidiaries, Gold Kist, Agri or Merger Sub; (e) the accuracy of information
supplied by the Company and Gold Kist included in this Proxy Statement and the
Schedule 13E-3; and (f) the absence of any investment banking, brokerage,
finder's or other similar fee or commission due by or on behalf of the Company
in connection with the Merger (except for fees payable to Robinson Humphrey,
as described under "Special Factors").
In the Merger Agreement, the Company has made certain additional
representations and warranties to Gold Kist, Agri and Merger Sub relating to
the following matters (which representations and warranties are subject, in
certain cases, to specified exceptions and, generally, apply only to facts and
circumstances existing as of the date of the Merger Agreement): (a) the
capital structure of the Company and its subsidiaries; (b) the delivery to
Gold Kist of certain documents filed by the Company with the Commission and
the accuracy of the information contained in such documents; (c) the fair
presentation of certain financial statements of the Company; and (d) the
proper filing by the Company with the Commission of all required documents and
the accuracy of the information contained in such documents.
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COVENANTS
The Company has agreed in the Merger Agreement that until consummation of
the Merger the Company and its subsidiaries will conduct their businesses in
the ordinary course consistent with past practice and (except for acts in
connection with to the Merger) will use their best efforts to preserve their
business organization and relationships with third parties and to keep
available the services of their present officers and employees. Without
limiting the generality of the foregoing, the Company has agreed that, without
the consent of Gold Kist, the Company will not, and, in the case of clauses
(b), (c), (d) and (g) will not permit any of its subsidiaries to: (a) adopt or
propose any change in its Articles of Incorporation or bylaws; (b) acquire,
whether by purchase of equity securities, merger or consolidation, any other
person or acquire a material amount of assets of any other person, except (i)
pursuant to existing contracts or commitments and (ii) in the ordinary course
consistent with past practice; (c) sell, lease, license or otherwise dispose
of any material assets or property except (i) pursuant to existing contracts
or commitments and (ii) in the ordinary course consistent with past practice;
(d) agree or commit to do any of the foregoing; (e) authorize for issuance,
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities or equity equivalents (including, without limitation, any
stock options or stock appreciation rights), except as required by outstanding
options or stock appreciation rights under the Company's 1988 Long-Term
Incentive Plan (the "Incentive Plan") as in effect as of the date of the
Merger Agreement, or amend any of the terms of any such securities, options or
rights outstanding as of the date of the Merger Agreement, except as
specifically contemplated by the Merger Agreement; (f) split, combine or
reclassify shares of its capital stock, declare, set aside or pay any dividend
or other distribution (whether in cash, stock or property or any combination
thereof) in respect of its capital stock (other than regular quarterly
dividends of not more than $.01 per share on Company Common Stock declared and
paid on dates consistent with past practice), or redeem or otherwise acquire
any of its securities or any securities of its subsidiaries; and (g) except as
may be required by law, enter into, adopt or amend or terminate any bonus,
profit sharing, compensation, severance, termination, stock option, stock
appreciation right, restricted stock, performance unit, stock equivalent,
stock purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan, fund
or other arrangement for the benefit or welfare of any director, officer or
employee in any manner, or (except for normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to the
Company, or as required under existing agreements) increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit not required by any plan and arrangement as in effect as of the
date hereof (including, without limitation, the granting of stock appreciation
rights or performance units).
The Company has agreed to give Gold Kist and its authorized representatives
full access to the offices, properties, books and records of the Company and
its subsidiaries and will furnish to Gold Kist and its authorized
representatives such financial and operating data and other information as
Gold Kist and its authorized representatives may reasonably request and will
instruct the Company's employees, counsel, financial advisors and auditors to
cooperate with Gold Kist in its investigation of the business of the Company
and its subsidiaries.
Each of Gold Kist, Agri, Merger Sub and the Company have agreed to use its
best efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable to consummate the
transactions contemplated by the Merger Agreement.
Gold Kist and the Company have agreed to cooperate (a) in determining
whether any action by or in respect of, or filing with, any governmental body,
agency or official, or authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the Merger and the transactions contemplated by
the Merger Agreement and (b) in seeking any such actions, consents, approvals
or waivers or making any such filings, furnishing information required in
connection therewith or with this Proxy Statement or the Schedule 13E-3 and
seeking timely to obtain any such actions, consents, approvals or waivers.
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Gold Kist and the Company have agreed to consult with each other before
issuing any press release or otherwise making any public statements with
respect to the Merger Agreement, the Merger and the transactions contemplated
thereby.
Gold Kist has agreed that for six years after the Effective Time, Gold Kist
will or will cause the Surviving Corporation to indemnify and hold harmless
the present and former officers and directors of the Company in respect of
acts or omissions occurring at or prior to the Effective Time to the extent
provided under the Company's articles of incorporation and bylaws in effect on
the date of the Merger Agreement. Gold Kist has further agreed that for such
six years after the Effective Time, Gold Kist will or will cause the Surviving
Corporation to provide officers' and directors' liability insurance in respect
of acts or omissions occurring prior to the Effective Time covering each such
person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount no less
favorable than those of such policy in effect on the date of the Merger
Agreement, provided that if such coverage is not obtainable at a cost less
than or equal to three times the amount per annum the Company paid in its last
full fiscal year, Gold Kist will or will cause the Surviving Corporation to
purchase such lesser amount of coverage, on terms as similar in coverage as
practicable to such coverage in effect on the date of the Merger Agreement, as
may be obtained having a cost per annum not to exceed three times the amount
per annum the Company paid in its last full fiscal year.
OTHER POTENTIAL BIDDERS
The Merger Agreement provides that the Company shall, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, received prior to or after the date of the
Merger Agreement, to any corporation, partnership, person or other entity or
group pursuant to appropriate confidentiality agreements, and may participate
in discussions and negotiate with any such entity or group concerning any
merger, sale of assets, sale of shares of capital stock or similar transaction
involving the Company or any subsidiary or division of the Company (any such
transaction being referred to herein as a "Competing Transaction"), if the
Special Committee determines after consultation with counsel that such action
is necessary in light of its fiduciary obligations to the Company's
shareholders. In addition, the Company shall direct its officers and other
appropriate personnel to cooperate with and be reasonably available to consult
with any such entity or group. Except as set forth above, the Company has
agreed that it will not solicit, participate in or initiate discussions or
negotiations with, or provide any information to, any corporation,
partnership, person or other entity or group (other than Gold Kist, Agri or
Merger Sub) concerning any merger, sale of assets, sale of shares of capital
stock or similar transaction involving the Company or any subsidiary or
division of the Company.
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective obligations of the Company, on the one hand, and Gold Kist,
Agri and Merger Sub, on the other hand, to consummate the Merger are subject
to the satisfaction or waiver, at or prior to the Effective Time, of the
following conditions, among others: (a) approval and adoption of the Merger
Agreement and the Merger by the holders of a majority of the outstanding
Voting Shares at the Special Meeting, which is assured because Gold Kist has
agreed to vote its 75% of the Common Stock in favor of the Merger Agreement
and the Merger; (b) approval and adoption of the Merger Agreement and the
Merger by the majority of the Voting Shares held by the Minority Shareholders
at the Special Meeting; (c) the absence of any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) enacted, issued, promulgated, enforced or entered
prohibiting the consummation of the Merger; (d) the receipt of all other
required authorizations, consents and approvals of governmental authorities;
(e) the performance of and compliance with, in all material respects, all
agreements and obligations contained in the Merger Agreement and required to
be performed or complied with at or prior to the Effective Time by the
respective parties to the Merger Agreement; (f) the material truth and
correctness of all representations and warranties of the parties to the Merger
Agreement; (g) the furnishing of officers' certificates as to the matters
covered in clauses (e) and (f) above; and (h) Robinson-Humphrey shall have
reaffirmed in writing its fairness opinion as of the date of mailing of this
Proxy Statement and again at the time of the Company Shareholder Meeting and
shall not have withdrawn its written fairness opinion.
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The obligations of Gold Kist, Agri and Merger Sub to consummate the Merger
are further subject to the satisfaction or waiver of certain conditions
including, among others: (a) there not having occurred any material adverse
change in the business, condition (financial or otherwise) or results of
operations of the Company, (b) receipt of required third party and
governmental consents necessary for consummation of the Merger and (c)
SunTrust shall have reaffirmed in writing its fairness opinion as of the date
of mailing of this Proxy Statement and again at the time of the Company
Shareholder Meeting and shall not have withdrawn its written fairness opinion.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, notwithstanding approval of the Merger Agreement
by the shareholders of the Company: (a) by mutual written consent of the
Company and Gold Kist; (b) by either the Company or Gold Kist if the Merger
has not been consummated by September 30, 1997; (c) by either the Company or
Gold Kist, if there shall be any law or regulation that makes consummation of
the Merger illegal or otherwise prohibited or if any judgment, injunction,
order or decree enjoining Gold Kist or the Company from consummating the
Merger is entered and becomes final and nonappealable; (d) by either the
Company or Gold Kist if the Merger Agreement fails to receive the requisite
vote for approval by a majority of shares held by the Minority Shareholders;
or (e) by Gold Kist or the Company (acting through the Special Committee), if
the Board of Directors of the Company or the Special Committee withdraws,
modifies or changes its recommendation of the Merger Agreement or the Merger
in a manner adverse to Gold Kist, Agri or Merger Sub or resolves to do any of
the foregoing or the Board of Directors of the Company recommends to the
shareholders of the Company any Competing Transaction or resolves to do so.
EXPENSES
Generally, the Merger Agreement provides that all costs and expenses
incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses.
However, if the Merger is not consummated, all printing expenses and filing
fees associated with the preparation and distribution of this Proxy Statement
will be divided equally between Gold Kist and the Company.
AMENDMENTS
The Merger Agreement may not be amended prior to the Effective Time except
by action of the Company, Gold Kist, Agri and Merger Sub set forth in a
written instrument signed on behalf of each of the parties; provided that any
such amendment by the Company must be approved by the Board of Directors of
the Company, acting on the recommendation of the Special Committee. After
approval of the Merger Agreement by the shareholders of the Company at the
Special Meeting and without the further approval of such shareholders, no
amendment to the Merger Agreement may be made which will change (i) the Merger
Consideration or (ii) any of the other terms and conditions of the Merger
Agreement if such change would adversely affect the shareholders of the
Company.
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DISSENTERS' RIGHTS
Pursuant to the provisions of Article 13 of the GBCC, if the Merger is
consummated, any holder of record of Common Stock who (i) gives to the
Company, prior to the vote at the Special Meeting with respect to the approval
of the Merger Agreement, written notice of such holder's intent to demand
payment for such holder's shares, and (ii) does not vote in favor thereof,
shall be entitled to receive, upon compliance with the statutory requirements
summarized below, the fair value of such holder's shares as of the Effective
Time, excluding any appreciation or depreciation in anticipation of the
Merger.
A shareholder of record may assert dissenters' rights as to fewer than all
the shares registered in such holder's name only if such holder dissents with
respect to all shares beneficially owned by any one beneficial shareholder and
such holder notifies the Company in writing of the name and address of each
person on whose behalf such holder asserts dissenters' rights. The rights of
such a partial dissenter are determined as if the shares as to which such
holder dissents and such holder's other shares were registered in the names of
different shareholders.
The written objection requirement referred to above will not be satisfied
under the GBCC by merely voting against approval of the Merger Agreement by
proxy or in person at the Special Meeting. Any holder of Common Stock who
returns a signed proxy but fails to provide instructions as to the manner in
which such shares are to be voted will be deemed to have voted in favor of the
transaction and will not be entitled to assert dissenters' rights. In addition
to not voting in favor of the Merger Agreement, a shareholder wishing to
preserve the right to dissent and seek appraisal must give a separate written
notice of such holder's intent to demand payment for such holder's shares if
the Merger is effected, as herein provided.
Any written objection to the Merger Agreement satisfying the requirements
discussed above must be addressed as follows: Golden Poultry Company, Inc.,
244 Perimeter Center Parkway, N.E., Atlanta, Georgia 30346, Attention:
Corporate Secretary.
After the Merger is authorized at the Special Meeting, the Company will
deliver a written dissenters' notice (the "Dissenters' Notice") to all holders
of Common Stock who have satisfied the foregoing requirements. The Dissenters'
Notice will be sent within ten days after the Effective Time and will (i)
state where the demand for payment must be sent and where and when
certificates for shares of Common Stock must be deposited, (ii) inform holders
of uncertificated shares to what extent transfer of these shares will be
restricted after the demand of payment is received, (iii) set a date by which
the Company must receive the demand for payment (which date may not be fewer
than 30 nor more than 60 days after the Dissenters' Notice is delivered), and
(iv) be accompanied by a copy of Article 13 of the GBCC.
A shareholder of record who receives the Dissenters' Notice must demand
payment and deposit such holder's certificates in accordance with the
Dissenters' Notice. Such shareholder will retain all other rights of a
shareholder until the consummation of the Merger. A record shareholder who
does not demand payment or deposit such holder's shares certificates where
required, each by the date set forth in the Dissenters' Notice, is not
entitled to payment for such holder's shares under Article 13 of the GBCC.
Except as described below, the Surviving Corporation must, within ten days
of the later of the Effective Time or receipt of a payment demand, offer to
pay to each dissenting shareholder who complied with the payment demand and
deposit requirements described above the amount the Surviving Corporation
estimates to be the fair value of such holder's shares, plus accrued interest
from the Effective Time. Such offer of payment must be accompanied by (i)
certain recent financial statements of the Company, (ii) the Surviving
Corporation's estimate of the fair value of the shares, (iii) an explanation
of how the interest was calculated, (iv) a statement of the dissenter's right
to demand payment under Section 14-2-1327 of the GBCC, and (v) a copy of
Article 13 of the GBCC. If the shareholder accepts the Surviving Corporation's
offer, or is deemed to have accepted the offer by failing to respond within 30
days, payment must be made within 60 days after the later of the making of the
offer or the Effective Time.
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If the Merger is not effected within 60 days after the date set forth
demanding payment and depositing share certificates, the Company must return
the deposited certificates and release the transfer restrictions imposed on
uncertificated shares. If, after such return and release, the Merger is
effected, the Surviving Corporation must send a new Dissenters' Notice and
repeat the payment demand procedure described above.
Section 14-2-1327 of the GBCC provides that a dissenting shareholder may
notify the Surviving Corporation in writing of such holder's own estimate of
the fair value of such holder's shares and the interest due, and may demand
payment of such holder's estimate, if (i) such holder believes that the amount
offered by the Surviving Corporation is less than the fair value of such
holder's shares or that the interest due has been calculated incorrectly, or
(ii) the Company, having failed to effect the Merger, does not return the
deposited certificates or release the transfer restrictions imposed on
uncertificated shares within 60 days after the date set for demanding payment.
A dissenting shareholder waives such holder's right to demand payment under
Section 14-2-1327 unless such holder notifies the Surviving Corporation of
such holder's demand in writing within 30 days after the Surviving Corporation
makes or offers payment for such holder's shares. If the Surviving Corporation
does not offer payment within ten days of the later of the Effective Time or
receipt of a payment demand, then (i) the shareholder may demand the financial
statements and other information required to accompany the Surviving
Corporation's payment offer, and the Surviving Corporation must provide such
information within ten days after receipt of the written demand, and (ii) the
shareholder may notify the Surviving Corporation of such holder's own estimate
of the fair value of such holder's shares and the amount of interest due, and
may demand payment of that estimate.
If a demand for payment under Section 14-2-1327 remains unsettled, the
Surviving Corporation must commence a nonjury equity valuation proceeding in
the Superior Court of DeKalb County, Georgia, within 60 days after receiving
the payment demand and must petition the court to determine the fair value of
the shares and the accrued interest. If the Surviving Corporation does not
commence the proceeding within those 60 days, it is required to pay each
dissenting shareholder whose demand remains unsettled, the amount demanded.
The Surviving Corporation is required to make all dissenting shareholders
whose demands remain unsettled parties to the proceeding and to serve a copy
of the petition upon each dissenting shareholder. The court may appoint
appraisers to receive evidence and to recommend a decision on fair value. Each
dissenting shareholder made a party to the proceeding is entitled to judgment
for the fair value of such holder's shares plus interest to the date of
judgment.
The court in an appraisal proceeding must determine the costs of the
proceeding, excluding fees and expenses of attorneys and experts for the
respective parties, and must assess those costs against the Surviving
Corporation, except that the court may assess the costs against all or some of
the dissenting shareholders to the extent the court finds they acted
arbitrarily, vexatiously, or not in good faith in demanding payment under
Section 14-2-1327. The court also may assess the fees and expenses of
attorneys and experts for the respective parties against the Surviving
Corporation if the court finds the Surviving Corporation did not substantially
comply with the requirements of specified provisions of Article 13 of the
GBCC, or against either the Surviving Corporation or the dissenting
shareholder if the court finds that such party acted arbitrarily, vexatiously,
or not in good faith with respect to the rights provided by Article 13 of the
GBCC.
If the court finds that the services of attorneys for any dissenting
shareholder were of substantial benefit to other dissenting shareholders
similarly situated, and that the fees for those services should not be
assessed against the Surviving Corporation, the court may award those
attorneys reasonable fees out of the amounts awarded the dissenting
shareholders who were benefited. No action by any dissenting shareholder to
enforce dissenters' rights may be brought more than three years after the
Effective Time, regardless of whether notice of the Merger and of the right to
dissent was given by the Company or the Surviving Corporation in compliance
with the Dissenters' Notice and payment offer requirements.
The foregoing is a summary of the material rights of a dissenting
shareholder of the Company but is qualified in its entirety by reference to
Article 13 of the GBCC, included as Exhibit B to this Proxy Statement.
34
<PAGE>
Any shareholder of the Company who intends to dissent from approval of the
Merger Agreement should carefully review the text of such provisions and
should also consult with such holder's attorney. No further notice of the
events giving rise to dissenters' rights or any steps associated therewith
will be furnished to the Company's shareholders, except as indicated above or
otherwise required by law.
Any dissenting shareholder who perfects such holder's rights to be paid the
fair value of such holder's shares will recognize taxable gain or loss upon
receipt of cash for such shares for federal income tax purposes. See "Certain
Federal Income Tax Consequences of the Merger."
SOURCE OF FUNDS FOR THE MERGER
Based on the Merger Consideration of $14.25 per share of Common Stock,
payable in cash without interest, the total amount of funds required to pay
the Merger Consideration following the Effective Time to the holders of all
outstanding shares of Common Stock on a fully diluted basis (including Common
Stock beneficially owned by officers and directors of the Company) and to pay
Gold Kist's related fees and expenses in connection with the Merger is
estimated to be approximately $ . Such amount will be provided out of a
combination of Gold Kist's cash balances and cash equivalents including
marketable securities, and borrowings under some or all of Gold Kist's
existing or committed credit facilities. Gold Kist currently has credit
facilities established with two lenders, and a commitment from a third lender
for a term loan, the general terms of which are as follows:
SunTrust Bank, Atlanta. Pursuant to a Credit Agreement dated August 9,
1996, among Gold Kist, SunTrust Bank, Atlanta, as agent, and various other
banks and lending institutions, Gold Kist has a commitment from such
lenders for a total credit facility of $250 million. Of that amount, $125
million is a revolving line of credit that expires in August 2001, and the
other $125 million is a 364-day line of credit that expires in August 1998.
Gold Kist currently has $50 million available under this credit facility.
The annual interest rate on borrowings under such credit facility is either
a "base rate," which is the higher of the prime rate or the federal funds
rate plus one-half of one percent, or a "LIBOR rate," which is LIBOR plus
an applicable percentage that varies depending on Gold Kist's ratio of
consolidated funded debt to total capital.
The Prudential Insurance Company of America. Pursuant to a Note Purchase
and Private Shelf Agreement dated February 11, 1997, between Gold Kist and
The Prudential Insurance Company of America ("Prudential"), during the two-
year period following such date Prudential may purchase from Gold Kist up
to $125 million of Gold Kist's senior promissory notes. In February 1997,
Gold Kist sold to Prudential $30 million of 7.60% Series A Senior Notes due
February 11, 2012, and in May 1997, Gold Kist sold to Prudential $25
million of 7.94% Series B Senior Notes due May 30, 2012. At Gold Kist's
request, Prudential may purchase an additional $70 million of senior notes,
on terms to be agreed upon by the parties, provided that such notes will
have maturity dates of 15 years or less.
CoBank, ACB. Pursuant to a commitment letter from CoBank, ACB dated April
17, 1997, CoBank, ACB has committed to lend Gold Kist $50 million in the
form of a term loan. This loan is available to Gold Kist through June 30,
1997, and the precise terms and conditions of the loan will be negotiated
if and when Gold Kist determines to borrow such funds.
35
<PAGE>
ESTIMATED FEES AND EXPENSES
Estimated fees and expenses incurred or to be incurred by the Company, Gold
Kist, Agri and Merger Sub in connection with the Merger are approximately as
follows:
<TABLE>
<S> <C>
Payment of Merger Consideration(1)................................. $55,196,420
Advisory fees(2)................................................... 560,000
Legal fees and expenses(3).........................................
Accounting fees and expenses.......................................
Securities and Exchange Commission filing fee...................... 11,039
Printing and mailing expenses......................................
Exchange Agent fees and expenses...................................
Proxy Solicitation fees and expenses...............................
Miscellaneous expenses............................................. 15,000
-----------
Total............................................................ $
===========
</TABLE>
- --------
(1) Includes payment for all outstanding shares of Common Stock other than
those owned by Gold Kist plus payments in settlement of outstanding
employee stock options in accordance with the Merger Agreement.
(2) Includes the fees and estimated expenses of Robinson-Humphrey and
SunTrust.
(3) Includes the estimated fees and expenses of counsel for the Company, the
Special Committee and Gold Kist.
36
<PAGE>
BUSINESS OF THE COMPANY
THE BROILER INDUSTRY
The broiler industry is conducted principally by integrated poultry
companies. The typical domestic integrated broiler company encompasses the
breeding, growing and processing of chickens and the marketing of chicken
products. A broiler is a chicken raised solely for consumption rather than for
egg production. Vertical integration of the industry has led to efficiencies
and enhanced coordination among all stages of production and processing. Price
competition has resulted in improved genetic, nutritional and processing
technologies to minimize production costs. Successful broiler processors have
coordinated functions to control production from breeding of the chickens
through sale of the finished products.
GENERAL
The Company is an integrated producer, processor, marketer and distributor
of poultry products consisting primarily of fresh chicken cut and packaged to
customer specifications. It sells processed whole chickens, chicken parts, and
other value-added and further-processed poultry products to retail grocers and
the commercial and institutional food service industry. The Company produces
golden-skin broiler products at integrated poultry complexes to serve the
Company's retail markets. The Company's retail products are marketed under the
Gold Kist Farms and Young 'n Tender labels or under customer private labels
and sold primarily in Florida, Georgia, California and the Mid-Atlantic,
Northeastern and Midwestern United States. The Company also purchases and
resells processed chicken, turkey, beef and pork products, ready-to-eat
products, seafood products and dairy products.
The Company is a 75% owned subsidiary of Gold Kist, a diversified
agricultural cooperative association whose business is conducted primarily in
the Southeastern United States. The executive offices of the Company are
located in Atlanta, Georgia and its production and processing facilities are
headquartered in Sanford, North Carolina, Douglas, Georgia, and Russellville,
Alabama.
In January 1982, Agri acquired the Douglas, Georgia, integrated broiler
complex which had been owned and operated by Swift Independent Packing Company
since 1958. Agri operated the complex until August 1982, at which time the
Company was incorporated and began business. At that time, Agri transferred
the assets and liabilities of the Douglas operations to the Company.
In June 1986, Carolina Golden Products, Inc., owner of a North Carolina
integrated poultry processing complex, was merged into the Company. Carolina
Golden Products, Inc. had been a joint venture of Gold Kist and FCX, Inc., and
Gold Kist acquired FCX's interest in the joint venture in January 1986.
In May 1987, the Company acquired the perishable foods warehouse and
distribution center facilities formerly operated by Don Lowe Foods, Inc., at
Pompano Beach, Florida. In addition to the wholesale distribution of
institutional food products sold to hotels, restaurants and retail chains, the
Company distributes fresh and frozen poultry products through the Pompano
Beach facility.
In April 1989, the Company replaced its Durham, North Carolina plant with a
new 76,000 square foot processing plant located on 438 acres in Sanford, North
Carolina. This facility has enabled the Company to increase production, to
produce a wider range of products and to expand as needs require.
The Company commenced operations at a new integrated production complex near
Russellville, Alabama, in 1990. This complex includes a hatchery, feed mill
and processing plant and produces value-added poultry products primarily for
the fast food industry. The Russellville complex increased the Company's
processing capacity by approximately 50% and diversified the Company's
operations beyond its focus on retail and institutional sales.
In January 1991, the Company entered into a general partnership agreement
with AgriGolden, Inc., a wholly owned subsidiary of Gold Kist, to form
Carolina Golden. The Company is a 51% general partner in Carolina
37
<PAGE>
Golden (Agri being the 49% partner) which has acquired and is operating a
poultry processing and further processing complex headquartered in Sumter,
South Carolina. This complex includes a processing plant, feed mill, broiler
farm and hatchery. It produces fresh, frozen and further processed poultry
products for the fast food industry and other customers.
PRODUCTS
The principal poultry products marketed are cut-up chickens, segregated
chicken parts, whole chickens and further processed poultry products. The
Company also produces deboned chicken products for sale to the retail grocery
market, deboned chicken breast meat for further processing and sale by the
fast food industry, and marinated, raw breaded chicken, fully cooked chicken
and preformed nugget and patty products for sale to distributors, retailers
and fast food customers. The Company produces a golden-skin broiler which is
particularly attractive for shelf display for retail sales and meets consumer
demand in the Florida, Mid-Atlantic, Northeastern and California retail
grocery markets served by the Company. The Company also distributes other
processed and prepared foods primarily through its Pompano Beach, Florida,
distribution facility.
The Company's products are packaged in the following forms: controlled
vacuum pack ("CVP"); ice pack; frozen, fresh and further processed; and chill
pack.
Controlled Vacuum Pack Chicken. CVP production, utilized primarily by the
Douglas facility, involves the vacuum sealing of bulk packaged chickens. This
process enhances the shelf life of the chicken and facilitates broader
geographic distribution of the products. CVP chicken is packaged primarily for
retail sales and includes whole and cut-up chickens.
Ice Pack Chicken. The Company produces and markets fresh ice pack chicken
parts and deboned product for sale to distributors, retailers and the fast
food industry. The Company also sells ice pack whole chickens to distributors
and retailers.
Frozen Chicken. The Company produces and markets frozen whole and cut-up
chicken. Freezing extends product life and permits delivery for sales outside
of the continental United States. The Company also sells frozen chicken to the
military services and fast food chains.
Chill Pack Chicken. The Company produces chill pack products at its Sanford
plant. Chill pack chicken can be packaged, labeled and priced ready for the
retail supermarket's fresh meat counter and is kept chilled by mechanical
refrigeration from the processing plant to the store counter.
OPERATIONS AND FACILITIES
An integrated poultry operation combines the elements necessary to produce a
finished poultry product, ready for sale to supermarkets or other customers.
The integrated operations proceed from the growing of breeder poultry stock
for hatching egg production to the packaging and distribution of the finished
poultry product.
Breeding and Hatching. The Douglas, Sanford, Russellville and Sumter
complexes contract on an incentive basis with pullet (young female chickens
raised to become breeding hens) and breeder farm operators located near the
Douglas, Sanford, Russellville and Sumter processing plants for the raising of
poultry pullets and breeding stock. The breeding chickens lay eggs, which are
then transported to the Company hatcheries in Douglas, Georgia, Siler City,
North Carolina, Russellville, Alabama and Sumter, South Carolina for hatching.
The Douglas hatchery has been expanded to a 49,700 square foot facility with a
hatch capacity of 1,350,000 chicks per week. The Siler City hatchery has been
expanded to 31,000 square feet increasing weekly hatch capacity to 870,000
chicks to accommodate operations at the Sanford processing facility. The
Russellville hatchery is a 35,000 square foot facility with a fully utilized
present hatch capacity of 875,000 chicks per week; the facility will be
expanded in order to provide a weekly hatch capacity of 1.4 million chicks by
December 1997. The Sumter hatchery has been expanded to 52,700 square feet
which will facilitate a weekly hatch capacity of 1,350,000 chicks.
38
<PAGE>
Grow-out. After the eggs are hatched, the Company delivers day-old chicks
from its hatcheries to approved poultry grower farms near Douglas, Sanford,
Russellville and Sumter. Under incentive contracts that compensate growers for
productivity, growers raise the chickens to an age of six to eight weeks, at
which time they are transported to the Company processing plants. The Sanford
complex has incentive contracts with approximately 150 contract growers, and
the Douglas complex has incentive contracts with approximately 130 growers.
The Russellville complex currently has incentive contracts with approximately
110 growers, and the Sumter complex has incentive contracts with approximately
100 growers. The Company emphasizes the importance of communications with
contract growers to assure that flocks are raised in accordance with the
Company's requirements and standards for live production. During the grow-out
period, the Company provides feed, medication, technical services and
consultation to the growers, who must satisfy Company requirements for care
and production of the chickens.
In addition to utilizing contract growers, the Company operates a broiler
grow-out farm on 70 acres near Douglas in Coffee County, Georgia. The farm
consists of 14 houses with a capacity of up to 420,000 chickens. The Company
also operates a broiler grow-out farm for the Sanford complex in Chatham
County, North Carolina, which consists of 16 houses with a capacity of up to
340,000 chickens. The Sumter complex has a 315 acre farm on which is situated
10 broiler houses with a capacity of up to 300,000 chickens. The Company farms
are operated to supplement the supply of chickens for the processing plants
and to provide a continuing demonstration to growers of modern grow-out
facilities and procedures.
Exchange of Broiler Chicks. In the fall of 1996, the Company's Russellville,
Alabama division entered into a new supply agreement with its major customer,
Keystone Foods, Inc. ("Keystone") pursuant to which, by December 1997, such
division will process and debone approximately 1.2 million male broilers per
week for Keystone. Prior to this agreement, the Russellville division had
processed an average of 750,000 birds per week which was composed of an equal
number of male and female broilers. The Company believes this substitution of
approximately 600,000 male broilers for female broilers will result in an
additional annual pretax profit. Because of the grow-out efficiency associated
with male broilers, the production of an additional 600,000 male broilers
(instead of female broilers) will result in lower live production cost on a
per pound basis.
As a result of Keystone's requirement for male broilers, the Company's
Russellville, Alabama division entered into an agreement with Gold Kist's N.W.
Alabama division to exchange female broiler chicks for male chicks. The
Company has agreed to pay (i) a premium of $0.0415 per chick to compensate
Gold Kist for the sexing, transportation and grow-out related costs associated
with the exchange arrangement; and (ii), in each profitable fiscal year of the
Company, an annual rebate equal to $0.005 per chick exchanged. The Company
believes the total annual premium to be approximately $1.4 million for 31.0
million chicks and the rebate amount is estimated to be approximately
$150,000. The components of the premium will be monitored and periodically
adjusted to reflect actual operating and growout experience.
Feed Mills. Poultry feed for broiler production at the Company's Douglas and
Sanford grow-out farms and contract grower farms is manufactured at the
Company's feed mills in Ambrose, Georgia, located 9 miles from the Douglas
facility, and in Bonlee, North Carolina, 15 miles from the Sanford facility.
The feed mill in Ambrose provides a capacity of 12,000 tons of feed per week
for the Douglas operations; the feed mill in Bonlee has a capacity of 5,500
tons per week. The Company's feed mill in Pride, Alabama, serving the
Russellville complex, has a capacity of 7,200 tons of feed per week. It is
located approximately 28 miles from the Russellville facility. The Sumter
complex feed mill serves the Company's grow-out farm and the complex's
contract growers. It has a capacity of 6,500 tons per week. Feed ingredients
for feed formulation are delivered by rail service to the feed mills, and
formulated feed is delivered by the Company to the contract growers and the
Company's farms by truck. Combined with Gold Kist's purchasing power and
expertise, Company-owned feed mills give the Company significant advantages in
quality and cost control.
Processing. Upon the completion of the grow-out period, the six to eight-
week old broilers are delivered on live-haul trucks to the Company's
processing plants in Sanford, Douglas, Russellville and Sumter. The Company
either performs or contracts for the catching of the chickens, and conducts
its own live-haul transportation, using Company employees and Company-owned or
leased vehicles and equipment.
39
<PAGE>
Processing is conducted at the Sanford, Douglas, Russellville and Sumter
plants. The Douglas processing plant has live bird holding facilities, a
service center for rolling stock, and offal and waste water pre-treatment
facilities. The processing facility has controlled vacuum packaging
capability. The current processing weekly capacity is approximately 1.3
million broilers and the facility size is 130,000 square feet.
The Douglas facility has three picking lines and three eviscerating lines;
two processing shifts are run daily. The plant has cold storage holding
capacity sufficient to accommodate two or three days' production. As with the
other complexes, products are moved from storage on a first-in, first-out
basis to ensure freshness.
The Sanford plant consists of a 76,000 square foot processing facility,
offal and complete waste water treatment facilities, a live bird holding shed,
and a service center for rolling stock. The facility has the packaging
capacity for over-wrapped tray packed items and whole birds. Tray packed parts
and whole birds can be chill-packed and weighed, prepriced and labeled to the
customer's order.
The Sanford facility utilizes two picking lines, two eviscerating lines, and
two separate chilling systems; two processing shifts are run daily. The
processing facilities at Sanford have a capacity of 850,000 chickens per week.
The facilities at the Russellville processing complex include a 110,000
square foot processing plant with wastewater treatment facilities, live bird
holding facilities, and a service center for rolling stock. The processing
facilities at Russellville have a capacity of 850,000 chickens per week. This
facility includes deboning production and other further processing capability
and utilizes two picking lines, two eviscerating lines, and two daily
processing shifts. It is being expanded to provide a weekly processing
capacity of 1.4 million chicks by December 1997.
The Sumter complex has live bird holding facilities, wastewater treatment
facilities, and a service center for rolling stock. The 435,000 square foot
processing plant, with further processing capability, has a production
capacity of 1.4 million chickens per week on two shifts, utilizing four
eviscerating lines and two picking lines.
In July 1996, the Company completed an acquisition of a poultry processing
complex headquartered in Siler City, North Carolina. The complex consists of a
60,000 square foot processing plant with a processing capacity of 630,000
chickens per week on two shifts. The facilities also include a feed mill in
Staley, North Carolina with a capacity of 4,000 tons of feed per week for the
Siler City operations, and a 35,520 square foot hatchery in Staley, North
Carolina with a weekly hatch capacity of 635,000 chicks. Products processed at
the Siler City complex include whole chickens and chicken parts, deboned and
further processed chicken products.
Distribution. Finished poultry products are shipped directly to customers or
through the Company's Pompano Beach, Florida and Durham, North Carolina
distribution centers. The Pompano Beach distribution center is a 32,000 square
foot refrigerated warehouse facility constructed specifically for the handling
of perishable foods and is used for distribution to Florida customers. The
5,000 square foot Durham facility is used by the Company for local sales and
distribution in Durham and eastern North Carolina.
Contract carriers transport Company products from the Sanford, Douglas,
Russellville and Sumter complexes to the distribution centers and customers.
other products brokered or purchased and resold by the Company (such as
processed turkey, beef and pork products, ready-to-eat products, seafood and
dairy products) are also distributed from the Pompano Beach facility.
MARKETING AND SALES
The primary markets served by the Company include the retail grocery market,
the institutional and commercial food market and the frozen food market. The
addition of the Russellville and Sumter operations has enabled the Company to
expand its market in serving the fast food industry.
Marketing and sales of the Company's fresh products are conducted primarily
on a decentralized basis by Company management and sales personnel at the
Douglas, Russellville, Sanford and Sumter complexes. Each
40
<PAGE>
complex has a sales manager and sales representatives to coordinate marketing
and distribution efforts and to provide customer service. The Company uses
local television, radio and newspaper advertising, coupon promotion, point of
purchase material and other marketing techniques to develop brand recognition
for the Gold Kist Farms and Young 'n Tender labels. The Company also uses
independent brokers to sell its frozen chicken products.
Products from Douglas are marketed principally to the Publix supermarket
chain which has more than 400 stores located throughout Florida, Georgia and
South Carolina. Douglas sells chicken to Publix in the form of whole, cut-up
and packaged chicken and marinated and deboned chicken parts. In fiscal 1994,
1995 and 1996, net sales to Publix accounted for 22%, 20% and 19%,
respectively, of the Company's net sales. Loss of Publix as a customer would
adversely affect the Company if these revenues were not replaced by comparable
sales to other customers. The remainder of the Douglas production is sold to a
variety of domestic purchasers primarily in Florida and California and some
customers in the export markets in the Far East and Caribbean. Some of these
products are marketed under the Early Bird label. The Gold Kist Farms, Young
'n Tender and Early Bird marks are registered trademarks licensed by Gold Kist
to the Company on a royalty basis under nonexclusive license agreements.
In fiscal 1994, 1995, and 1996, sales to Gold Kist represented approximately
21%, 20% and 21%, respectively, of the Company's net sales, principally
pursuant to a marketing agreement between Gold Kist and Carolina Golden under
which the Sumter complex supplies a significant portion of its further
processed chicken products to Gold Kist at values which approximate market for
cooperative marketing.
Products from Sanford are marketed to retail and wholesale markets in North
Carolina, the Mid-Atlantic, and the Midwestern and Northeastern United States
and to export markets. Sanford sells ice pack and chill pack whole chicken
cut-up chicken and value-added packaged products. In addition, it produces
tray-packed items and other specialized chicken products popular in the retail
food market. These products are sold primarily under customers' private labels
although Sanford sells some products under the Gold Kist Farms and Young 'n
Tender labels.
The Sanford and Douglas complexes provide each other back-up production
capacity. This capability helps to address conditions of seasonal or peak
market demands and possible production problems encountered by the complexes.
The Company's Russellville, Alabama complex is currently producing chicken
product for the fast food market, primarily deboned white meat products from
male chickens. The other Russellville production is sold in the retail,
institutional and export markets.
The Sumter complex produces fresh, frozen and further processed poultry
products for the fast food industry and retail grocery and institutional
customers primarily in the Southeastern United States. Products include
skinless and skin-on cut-up chicken, marinated breaded and partially or fully
cooked chicken products. Further processed products produced at the Sumter
Complex are marketed pursuant to a marketing agreement with Gold Kist.
Poultry prices and demand have historically been seasonal, with demand for
poultry declining in winter months. Management believes that the Company's
strong position in the Florida market reduces the impact of this seasonality,
particularly for the Douglas complex. Because of the large influx of people
into Florida during the winter months, the winter demand for poultry products
increases even though per capita demand decreases as it does elsewhere in the
country.
COMPETITION
The Company markets its products in competition with larger poultry
producers and smaller companies on the basis of service, quality and price.
The principal competitive factors for the retail and grocery market are
quality of product and timely service. Brand name recognition is also a
factor. The principal competitive factors in the fast food industry are
customized product form and size, quality and timely service.
41
<PAGE>
The Company's premium golden-skin poultry products with the attractive shelf
display characteristic of the product enhance retail sales due to regional
customer preferences in the Florida, Mid-Atlantic, Northeastern and California
markets. The Company's value-added product line provides the ability to
deliver poultry products responsive to purchasers' special orders. Moreover,
the Company's live-production performance, technologically advanced facilities
and its feed ingredient and other input purchasing expertise (through its
relationship with Gold Kist) facilitate flexibility and responsiveness in
serving its customers.
The Company also competes with other poultry processors for contract growers
to grow pullets and breeding stock and to raise broiler chickens for
processing.
ADMINISTRATIVE SERVICES AGREEMENT
Gold Kist provides certain administrative, staff and operating functions for
the Company pursuant to management services agreements which are renewable
annually. Under the agreements, Gold Kist provides a broad range of corporate
functions and services. The area of service include:
(1) accounting, auditing and financial reporting, consultation and
services;
(2) purchasing and distribution;
(3) marketing and advertising;
(4) poultry feed manufacturing and consultation services;
(5) engineering services;
(6) information systems processing and consultation;
(7) research, quality assurance, veterinary and technical services;
(8) corporate protection and risk management services;
(9) real estate and corporate planning services;
(10) human resources management;
(11) communications and government and public relations; and
(12) credit services.
The Company pays to Gold Kist (a) a negotiated annual sum equal to Gold
Kist's costs in providing these services, plus (b) 5.8% of the Company's
earnings before income taxes assuming a Company return on assets employed
("ROAE") of more than 10%, or 3.5% of the Company's earnings before income
taxes assuming a positive Company ROAE of less than 10%.
ENVIRONMENTAL AND REGULATORY MATTERS
The Company's facilities and operations are subject to the regulatory
jurisdiction of various federal and state agencies, including the Federal Food
and Drug Administration, United States Department of Agriculture,
Environmental Protection Agency, Occupational Safety and Health
Administration, and corresponding state agencies. Management does not know of
any material capital expenditures that will be necessary to comply with
current statutes and regulations. Compliance has not had a material adverse
effect upon the Company's earnings or competitive position in the past, and it
is not anticipated to have a material adverse effect in the future.
HUMAN RESOURCES
As of December 28, 1996, the Company employed approximately 1,595 employees
at its Sanford complex, which includes 686 employees at the Company's Siler
City, North Carolina Plant, 1,292 employees at its Douglas complex, 1,080
employees at its Russellville complex, 33 employees at its Pompano Beach
distribution center, 18 employees at its Durham distribution center,
approximately 2,359 employees in its Sumter complex, and approximately 6,377
employees in all of its operations. None of the operations are unionized.
42
<PAGE>
PROPERTIES
Facilities used in the Company's business are described in "Business of the
Company--Operations and Facilities." The Company believes that its current
facilities are adequate and suitable for their respective uses. The Company
owns all of its operating facilities, except for the Durham distribution
facility leased from Gold Kist, and the Russellville, Alabama feed mill site
which is leased from the Industrial Development Board of Colbert County,
Alabama. There are no material encumbrances on the Company's facilities except
for a mortgage deed on the Pompano Beach distribution facility with a $1.014
million balance at March 1, 1997. See Note 3 of "Notes to Consolidated
Financial Statements."
43
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY
The following table sets forth selected historical financial information for
the Company and its subsidiaries as of and for the six months ended December
28, 1996 and December 30, 1995 and as of and for each of the prior five fiscal
years in the period ended June 29, 1996. The following financial information
should be read in conjunction with "Management's Discussion and Analysis of
Results of Operations and Financial Condition" and the Consolidated Financial
Statements and related Notes included elsewhere in this Proxy Statement. The
interim unaudited information for the Company and its subsidiaries for the six
months ended December 28, 1996 and December 30, 1995 reflect, in the opinion
of management of the Company, all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the information
provided for such interim periods. The results of operations of such interim
periods are not necessarily indicative of results which may be expected for
any other interim period or for the year as a whole.
<TABLE>
<CAPTION>
FOR FISCAL YEARS ENDED FOR SIX MONTHS ENDED
------------------------------------------------ -------------------------
JUNE 27, JUNE 26, JUNE 25, JULY 1, JUNE 29, DECEMBER 30, DECEMBER 28,
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Net sales............. $336,806 $388,330 $447,139 $505,975 $600,237 $287,866 $357,704
Cost of sales......... 330,759 363,407 427,607 486,064 552,184 262,247 334,326
-------- -------- -------- -------- -------- -------- --------
Gross profit.......... 6,047 24,923 19,532 19,911 48,053 25,619 23,378
Selling,
administrative and
general expenses..... 13,120 15,272 16,122 16,687 20,999 10,551 10,923
-------- -------- -------- -------- -------- -------- --------
Operating income
(loss)............... (7,073) 9,651 3,410 3,224 27,054 15,068 12,455
-------- -------- -------- -------- -------- -------- --------
Other (expense)
income:
Interest expense...... (2,273) (2,366) (1,311) (1,703) (1,459) (779) (618)
Interest income....... 6 74 67 12 7 -- --
Miscellaneous, net.... 767 1,044 299 381 208 155 58
-------- -------- -------- -------- -------- -------- --------
(1,500) (1,248) (945) (1,310) (1,244) (624) (560)
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
minority interest,
income taxes, and
cumulative effect of
change in accounting
principle............ (8,573) 8,403 2,465 1,914 25,810 14,444 11,895
Minority interest in
partnership
(earnings) loss...... 5,751 4,102 3,259 1,965 (243) 305 (1,385)
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
income taxes and
cumulative effect of
change in accounting
principle............ (2,822) 12,505 5,724 3,879 25,567 14,749 10,510
Income tax expense
(benefit)............ (1,044) 4,642 1,676 1,132 9,526 5,647 3,998
-------- -------- -------- -------- -------- -------- --------
Earnings (loss) before
cumulative effect of
change in accounting
principle............ (1,778) 7,863 4,048 2,747 16,041 9,102 6,512
Cumulative effect of
change in accounting
principle, net of
income tax benefit of
$748(A).............. (1,517) -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net earnings (loss)... $ (3,295) $ 7,863 $ 4,048 $ 2,747 $ 16,041 $ 9,102 $ 6,512
======== ======== ======== ======== ======== ======== ========
Net earnings (loss)
per share:
Earnings (loss) before
cumulative effect of
change in accounting
principle............ $ (.12) $ .53 $ .27 $ .19 $ 1.10 $ .63 $ .45
Cumulative effect of
change in accounting
principle............ $ (.10) $ -- $ -- $ -- $ -- $ -- $ --
Net earnings (loss)... $ (.22) $ .53 $ .27 $ .19 $ 1.10 $ .63 $ .45
Cash dividends per
share.................. $ .033 $ .034 $ .037 $ .04 $ .04 $ .02 $ .02
</TABLE>
- -------
(A) In fiscal 1992, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions."
44
<PAGE>
<TABLE>
<CAPTION>
AS OF
----------------------------------------------------------------------
JUNE 27, JUNE 26, JUNE 25, JULY 1, JUNE 29, DECEMBER 30, DECEMBER 28,
1992 1993 1994 1995 1996 1995 1996
-------- -------- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Total assets.......... $143,922 $141,435 $154,500 $155,604 $163,979 $158,145 $198,759
Property, plant and
equipment, net....... 93,856 82,407 87,591 79,573 73,738 74,876 94,974
Working capital....... 22,718 31,599 24,824 32,938 44,535 38,685 45,635
Long-term debt........ 8,823 7,648 13,462 12,425 4,840 5,359 17,754
Long -term debt,
payable to Gold Kist. 25,000 20,000 -- -- -- -- --
Other liabilities..... 2,664 2,473 3,720 4,509 5,495 4,509 5,495
Shareholders' equity.. 77,928 85,308 88,220 88,886 104,357 97,723 110,621
</TABLE>
Information herein has been adjusted to reflect two one-for-ten stock dividends
paid in February 1993 and February 1994.
45
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Profitability in the broiler industry is primarily related to consumer
demand for chicken and market prices for feed grains, a major component of
production costs. The industry, like other agricultural businesses that sell
and purchase perishable commodities, is cyclical and especially sensitive to
supply and demand market forces. Supply and demand, in turn, vary greatly with
changing weather conditions, supply and pricing of alternative products,
changes in export markets, government policy and industry production capacity.
The Company's profitability, consistent with other broiler companies, is
substantially affected by market prices for broiler products and feed grains.
Broiler and feed grain prices historically have fluctuated, sometimes in
opposite directions. As part of its feed ingredient purchasing strategy, the
Company has attempted to limit the effects and risk of fluctuations in feed
ingredient costs through commodity trading transactions in the agricultural
commodity futures and options markets as market conditions dictate. (See note
l(c) of Notes to Consolidated Financial Statements.) Feed grain costs
represent approximately fifty percent of total broiler production costs. Other
production costs include hatching egg production, hatching, grow-out,
transportation, feed manufacturing and processing costs, which are positively
influenced by efficient cost control procedures and management practices.
In 1992, market prices for corn and soybean meal, principally feed grains,
increased as supplies came more in balance with world demand. Exports to the
Commonwealth of Independent States contributed to this increase. During fiscal
1993, market prices for corn declined about 5% due to the record 1992 corn
harvest. As a result of the Midwestern floods in 1993, market prices for corn
and soybeans for fiscal 1994 increased 21% and 9%, respectively. Due to
increased production of U.S. feed grains in 1994, feed ingredient costs
declined in fiscal 1995. Average cash market prices for corn and soybean meal
increased 59% and 30%, respectively, during 1996 as compared to 1995 due to
the weather reduced 1995 harvest and strong export demand.
Broiler market prices remained at low levels throughout most of fiscal 1992
due to the economic recession affecting the United States, the decline in
poultry exports and excess industry supply. As the United States economy
improved in 1992 and early 1993, market prices for broilers for fiscal 1993
increased approximately 5% as a result of increased consumer demand for
poultry products. In fiscal 1994, broiler market prices increased
approximately 6% as a result of the improvement in the domestic economy and
the increases in poultry exports. During fiscal 1995, broiler market prices
declined approximately 5% due primarily to the large supply of competing
meats, such as beef and pork, and the continuation of poultry industry
expansion. During 1996, average broiler market prices increased approximately
10% as compared to 1995 as a result of hot, dry weather conditions that
lowered meat production in the summer of 1995, as well as lower than expected
poultry industry expansion and favorable export markets.
46
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
PERCENTAGE RELATIONSHIP TO NET SALES
----------------------------------------------------
FOR FISCAL YEARS ENDED FOR SIX MONTHS ENDED
-------------------------- -------------------------
JUNE 25, JULY 1, JUNE 29, DECEMBER 30, DECEMBER 28,
1994 1995 1996 1995 1996
-------- ------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales.................. 100.00% 100.00% 100.00% 100.00% 100.00%
Cost of sales.............. 95.63 96.06 91.99 91.10 93.46
------ ------ ------ ------ ------
Gross profit............... 4.37 3.94 8.01 8.90 6.54
Selling, administrative and
general expenses.......... 3.61 3.30 3.50 3.67 3.06
------ ------ ------ ------ ------
Operating income........... .76 .64 4.51 5.23 3.48
------ ------ ------ ------ ------
Other (expense) income:
Interest expense......... (.28) (.34) (.24) (.27) (.17)
Miscellaneous............ .07 .08 .03 .06 .02
------ ------ ------ ------ ------
Earnings before minority
interest and income taxes. .55 .38 4.30 5.02 3.33
Minority interest in
partnership (earnings)
loss...................... .73 .39 (.04) .10 (.39)
------ ------ ------ ------ ------
Earnings before income
taxes..................... 1.28 .77 4.26 5.12 2.94
Income tax expense......... .37 .23 1.59 1.96 1.12
------ ------ ------ ------ ------
Net earnings............... .91% .54% 2.67% 3.16% 1.82%
====== ====== ====== ====== ======
</TABLE>
FISCAL 1996 COMPARED TO FISCAL 1995
Net Sales. Net sales for 1996 were $600.2 million, an increase of
approximately 19% from net sales of $506.0 million for 1995. Of the increase
in net sales, 10% resulted from an increase in average selling prices and 9%
from an increase in pounds of broiler products marketed. The Company sold
approximately 884.5 million pounds of broiler products in 1996 as compared to
813.4 million pounds in 1995. The increase in pounds of broilers marketed was
due to changes in product mix requiring larger broilers for the production of
deboned products. Broiler market prices strengthened in 1996 as a result of
lower than expected U.S. broiler production and strong export demand.
Consolidated net sales include the net sales of Carolina Golden, a
consolidated partnership, which had net sales of $167.7 million and $136.9
million, respectively, for fiscal 1996 and 1995. Net sales of Carolina Golden
include $127.7 million in net sales of further-processed poultry products to
Gold Kist. These further-processed products are resold under a joint marketing
agreement whereby similar products produced by Gold Kist and Carolina Golden
are marketed by Gold Kist. The Company's perishable food distribution facility
in South Florida had net sales of $33.6 million and $31.7 million,
respectively, for fiscal 1996 and 1995.
Cost of Sales. Fiscal 1996 cost of sales decreased to 91.99% of net sales
from 96.06% of net sales in fiscal 1995. The decrease in the percentage
relationship was primarily the result of the increase in average selling
prices, which was partially offset by higher feed ingredient costs. Although
cash commodity prices for feed grains, such as corn and soybean meal increased
59% and 30%, respectively, from a year ago, the Company's forward purchasing
and hedging strategies resulted in an 8% increase in feed ingredient costs for
fiscal 1996. Improvements in processing efficiency also contributed to the
decline in the percentage relationship. Fiscal 1996 cost of sales included
$32.6 million associated with the perishable food distribution facility in
South Florida as compared to $30.6 million for 1995.
Selling, administrative and general expenses. Selling, administrative and
general expenses for fiscal 1996 were $21.0 million or 3.50% of net sales as
compared to $16.7 million or 3.30% of net sales in fiscal 1995. The increase
in the percentage relationship was due primarily to increased incentive
compensation expense related to the improvement in net earnings.
47
<PAGE>
Interest and other income. Fiscal 1996 interest expense of $1.5 million
decreased $244,000 as compared to fiscal 1995 as a result of lower average
borrowings. The Company recorded capitalized construction period interest
credits of $72,000 and $93,000, respectively, during fiscal 1996 and 1995.
Minority interest in partnership (earnings) loss. Minority interest in
partnership earnings of $243,000 for fiscal 1996 represents Gold Kist's 49%
pro rata share of Carolina Golden's earnings. For 1995, Gold Kist's pro rata
share of Carolina Golden's loss was $2.0 million. (See note l(a) of Notes to
Consolidated Financial Statements.) Carolina Golden had earnings of $497,000
for 1996 as compared to a loss of $4.0 million in 1995. Earnings for 1996
resulted from improved performance in further processing operations and higher
average selling prices.
Earnings before income taxes. Fiscal 1996 earnings before income taxes of
$25.6 million compares to $3.9 million for 1995. The increase in earnings
before income taxes was due to higher average selling prices and improvements
in plant operations. These factors were partially offset by increased feed
ingredient costs.
Income taxes. The Company's effective tax rate was 37.3% for 1996 as
compared to 29.2% for 1995. The increase in the effective rate was due to the
expiration of targeted jobs credits and the increase in the federal statutory
income tax rate for 1996 to 35%. The federal statutory rate for 1995 was 34%.
FISCAL 1995 COMPARED TO FISCAL 1994
The Company's accounting cycle resulted in 53 weeks of operations in fiscal
1995 and 52 weeks in fiscal 1994.
Net sales. Net sales of $506.0 million increased approximately 13% from
$447.1 million in fiscal 1994. The increase in consolidated net sales resulted
from a 16% increase in pounds of broiler products sold, which was partially
offset by a 3% decrease in average selling prices. The increase in pounds
processed and marketed was primarily the result of an expansion program
completed in the prior fiscal year. Broiler market prices declined during
fiscal 1995 as a result of increased supplies of competing meats and increased
U.S. broiler production.
Consolidated net sales include the net sales of Carolina Golden, a
consolidated partnership, which had net sales of $136.9 million and $109.9
million, respectively, for fiscal 1995 and 1994. Net sales of Carolina Golden
include $102.1 million in net sales of further-processed and fresh poultry
products to Gold Kist. The Company's perishable food distribution facility in
South Florida had net sales of $31.7 million and $25.2 million, respectively,
for fiscal 1995 and 1994.
Cost of Sales. Fiscal 1995 cost of sales increased to 96.06% of net sales
from 95.63% of net sales in fiscal 1994. The increase in the percentage
relationship was primarily the result of the decline in average selling
prices, which was partially offset by lower feed ingredient costs and lower
processing costs on a per pound basis. Feed ingredient costs for fiscal 1995
declined about 8% as compared to fiscal 1994. Fiscal 1995 cost of sales
included $30.6 million associated with the perishable food distribution
facility in South Florida as compared to $24.2 million for 1994.
Selling, administrative and general expenses. Selling, administrative and
general expenses for fiscal 1995 were $16.7 million or 3.30% of net sales as
compared to $16.1 million or 3.61% of net sales in fiscal 1994. The decline in
the percentage relationship reflected the impact of the increase in sales
volume.
Interest and other income. Fiscal 1995 interest expense of $1.7 million
increased $392,000 as compared to fiscal 1994 due to higher interest rates and
lower capitalized construction period interest credits. The Company recorded
capitalized construction period interest credits of $93,000 during fiscal 1995
as compared to $226,000 for fiscal 1994.
Minority interest in partnership loss. Minority interest in partnership loss
of approximately $2.0 million and $3.3 million for fiscal 1995 and 1994,
respectively, represents Gold Kist's 49% pro rata share of Carolina
48
<PAGE>
Golden's loss. (See note l(a) of Notes to Consolidated Financial Statements.)
The decline in partnership loss resulted from improved operating performance
in further-processing operations, which was partially offset by weak broiler
market prices in fresh poultry operations.
Earnings before income taxes. Fiscal 1995 earnings before income taxes of
$3.9 million compares to $5.7 million for fiscal 1994. The decline in earnings
before income taxes reflects the decrease in average selling prices, which was
partially offset by lower feed ingredient prices.
Income taxes. The Company's effective tax rate was 29.2% for 1995 as
compared to 29.3% for 1994. The effective rates for 1995 and 1994 reflected
the impact of targeted jobs credits. The federal statutory rate was 34% for
1995 and 1994.
SIX MONTHS ENDED DECEMBER 28, 1996 COMPARED TO SIX MONTHS ENDED
DECEMBER 30, 1995
Net sales. Net sales for the six months ending December 28, 1996 increased
24.3% as compared to the comparable period a year ago, due primarily to a 17%
increase in pounds of poultry products sold and a 6.4% increase in average
selling prices. For the six months ended December 28, 1996, broiler market
prices increased as compared to the same period a year ago as a result of
strong demand, particularly in the export markets, and the lower rate of
growth in the poultry industry. The increase in broiler pounds sold was due to
the Siler City acquisition in July 1996 and changes in product mix. For the
six months ended December 28, 1996, the Company sold approximately 496.3
million pounds of broiler products as compared to 424.5 million in the
comparable period a year ago.
Consolidated net sales include the net sales of Carolina Golden, a
consolidated partnership, which had net sales of $98.8 million for the six
months ended December 28, 1996 as compared to $80.9 million for the comparable
period a year ago. The Company's food distribution facility in South Florida
had net sales of $18.2 million for the six months ended December 28, 1996 as
compared to $16.2 million for the same period last fiscal year.
Cost of sales. Cost of sales, as a percentage of net sales, for the six
months ended December 28, 1996 was 93.5% as compared to 91.1% for the
comparable period a year ago. The increase in the percentage relationship was
primarily the result of the increase in feed ingredient costs. The 17%
increase in pounds sold during the current six month period contributed to the
dollar increase in cost of sales. For the six months ended December 28, 1996,
feed ingredient costs were approximately 40% higher than in the comparable
quarter a year ago. The increase in the percentage relationship was partially
offset by the increase in average selling prices.
Although the Company's feed ingredient costs for the six months ended
December 28, 1996 remained at significantly higher levels than the same
quarter last year, cash market prices for feed grains declined substantially
during the quarter ended December 28, 1996 as a result of the large 1996 U.S.
grain harvest.
Selling, administrative, and general expenses. Selling, administrative and
general expenses, as a percentage of net sales, were 3.1% for the six months
ended December 28, 1996 as compared to 3.7% for the comparable period last
fiscal year. The decrease in the percentage relationship was primarily the
result of the growth in net sales.
Interest and other Income. Interest expense for the six months ended
December 28, 1996 was $618,000 as compared to $779,000 in the comparable
period a year ago. The interest decrease was due primarily to the Company's
recording of capitalized construction period instant credits of $223,000
during the six-months ended December 28, 1996, while no such credits were
recorded during the comparable period a year ago.
Minority interest in partnership loss. Minority interest in partnership gain
of $1.4 million for the six months ended December 28, 1996 represents Gold
Kist's 49% pro rata share of the Carolina Golden's quarterly gain. For the
comparable period last fiscal year, Gold Kist's pro rata share of the loss was
$305,000. Earnings for the six months ended December 28, 1996 resulted from
improved performance in further-processing operations and higher average
selling prices.
49
<PAGE>
Earnings (loss) before income taxes. The Company had earnings before income
taxes of $10.5 million for the six months ended December 28, 1996 as compared
to $14.7 million for the comparable period last fiscal year. The decline in
earnings before income taxes was due to increased feed ingredient costs and
was partially offset by higher average selling prices.
Income Taxes. The Company's combined federal and state income tax rate was
38.0% for the six months ended December 28, 1996 as compared to 38.3% for the
same period a year ago.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is dependent upon cash flows from operations and the
ability to obtain additional financing from external sources and Gold Kist.
The Company has a $20.0 million revolving credit and term loan facility with a
commercial bank. The revolver extends until 1998, when the outstanding
borrowings may be converted to a term loan payable over five years. In
addition, the Company has a $15.0 million short-term credit facility with Gold
Kist. In August 1996, the Company established a new $25.0 million revolving
credit facility with a commercial bank.
At December 28, 1996, working capital, the current ratio, and shareholders'
equity were $45.6 million, 1.86 to 1 and $110.6 million, respectively, as
compared to $44.5 million, 2.14 to 1 and $104.4 million, respectively, at June
29, 1996. The Company's ratio of long-term debt to total capitalization was
13.8% at December 28, 1996 as compared to 4.4% at June 29, 1996. The Company
has revolving credit facilities with two commercial banks totaling $45.0
million, of which $13.0 million was outstanding at December 28, 1996. Also,
the Company has a $15.0 million short-term credit facility with Gold Kist of
which $7.2 million was outstanding at December 28, 1996.
Net cash provided by operating activities of $5.4 million for the six months
ended December 28, 1996 resulted from net earnings adjusted for noncash
charges. Increased trade accounts receivable and inventories at December 28,
1996 as compared to June 29, 1996 resulted from the acquisition of the Siler
City, N.C. operation in July 1996 and the impact of increased feed grain
prices on field inventories. Uses of cash for the six months ended December
28, 1996 included $25.3 million in expenditures for property, plant and
equipment.
Covenants under the terms of industrial development bonds and the revolving
credit and term loan agreement require the Company to maintain certain
financial ratios and minimum levels of working capital and tangible net worth
(see note 3 of Notes to Consolidated Financial Statements). Additional
provisions impose restrictions on future borrowings and investments. Under the
industrial development bond covenants, the Company must maintain net earnings,
plus depreciation expense, equal to or greater than 170% of the total of the
current portion of long-term debt. The revolving credit and term loan
agreement covenants require the Company to maintain a 1.5 to 1 ratio of
earnings before interest and taxes to interest expense on a rolling eight
quarter basis.
Effective July 23, 1993, the Company and Gold Kist contributed $24.0 million
of partnership equity to Carolina Golden in the same proportion as their
respective ownership percentages. The Company's equity contribution of $12.2
million represented conversion of existing short-term financing provided to
Carolina Golden. Gold Kist's equity contribution of $11.8 million to the
partnership was used to repay long-term debt owed to Gold Kist. In January
1995, the Company and Gold Kist contributed $6.0 million of partnership equity
in the same proportion as their respective ownership percentages.
During fiscal 1994, 1995 and 1996, the Company's cash used in investment
activities principally involved capital expenditures to construct, expand and
improve broiler production, processing and distribution facilities. The
sources of cash for these expenditures were cash flows generated from
operating activities, long-term borrowings and additional partnership equity.
During fiscal 1996, net cash provided by operations was used to repay
borrowings and purchase property, plant and equipment.
50
<PAGE>
Fiscal 1994 capital expenditures of $21.7 million included a major expansion
of the processing plant at the Douglas, Georgia complex and an additional
fresh processing line at the Sumter, South Carolina facility. The completion
of the two projects increased the Company's processing capacity to 4.3 million
broilers per week. During fiscal 1996, the Company processed an average of 3.9
million broilers per week. Fiscal 1995 and 1996 expenditures of $9.0 million
and $12.6 million, respectively, included additional further processing
capabilities at the Sumter complex and general improvements to existing
production facilities. In July 1996, the Company acquired poultry production
facilities at Siler City, North Carolina for approximately $11.0 million. The
complex, which includes a hatchery, feed mill and processing plant, is capable
of processing 630,000 broilers per week. In addition to the Siler City, North
Carolina purchase, the Company anticipates fiscal 1997 capital expenditures
for replacements and upgrading to existing operations, as well as the
construction of additional processing capacity at its Russellville, Alabama
facility.
Approximately 19% of the Company's net sales in fiscal 1996 and the recent
six months were to one customer, a major retail grocery chain. Management is
unable to predict with any degree of certainty what effect the loss of this
major customer would have on future results of operations and liquidity.
However, the loss of the customer would, in the opinion of management,
adversely affect results of operations if sales from the customer were not
replaced by comparable sales to other customers.
Management believes existing cash, amounts available under existing credit
arrangements, and expected cash to be provided from operations will be
sufficient to maintain cash flows adequate for the Company's growth and
operational objectives during fiscal 1997.
FUTURE ACCOUNTING REQUIREMENTS
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") was issued. SFAS 123
encourages companies to adopt a fair value based method of accounting for
stock-based compensation plans in place of the intrinsic value based method
provided for by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25"). Companies which continue to apply the
provisions of APB 25 must make pro forma disclosures in the notes to their
financial statements of net income and earnings per share as if the fair value
based method of accounting defined in SFAS 123 had been applied. The Company
plans to adopt SFAS 123 in fiscal year 1997 on a pro forma disclosure basis.
In February 1997, Statement of Financial Accounting Standards No. 128
"Earnings per Share" ("SFAS 128") was issued. SFAS 128 establishes standards
for computing and presenting earnings per share. SFAS 128 is effective for
financial statements for periods ending after December 15, 1997. The Company
does not believe that the adoption of SFAS 128 would have a significant impact
on the Company's financial statements.
EFFECTS OF INFLATION
The major factors affecting the Company's net sales and cost of sales are
changes in market prices for broilers and feed ingredients such as grains and
soybeans. The prices of these commodities are based on world market conditions
and are highly sensitive to supply and demand forces, as well as political and
economic events. The fluctuations in price of these commodities do not
necessarily correlate with the general inflation rate.
51
<PAGE>
MARKET PRICES FOR THE COMMON STOCK
The Company's Common Stock is listed and traded on the Nasdaq National
Market under the symbol "CHIK." The following table sets forth the high and
low bid price per share of Common Stock, as reported by the Nasdaq National
Market for the fiscal periods indicated:
<TABLE>
<CAPTION>
PERIOD
------
HIGH LOW
FISCAL 1995 ------ ------
<S> <C> <C>
First Quarter................................................. $ 7.75 $ 5.63
Second Quarter................................................ 7.25 5.56
Third Quarter................................................. 7.25 5.50
Fourth Quarter................................................ 6.50 5.75
FISCAL 1996
First Quarter................................................. $ 6.68 $ 5.75
Second Quarter................................................ 9.00 6.13
Third Quarter................................................. 12.25 8.25
Fourth Quarter................................................ 11.25 8.50
FISCAL 1997
First Quarter................................................. $12.25 $ 9.00
Second Quarter................................................ 11.38 9.13
Third Quarter................................................. 12.88 10.50
</TABLE>
On January 22, 1997, the date before the public announcement that Gold Kist
and the Special Committee were beginning merger discussions, the high and low
bid prices per share for the Common Stock were $11.25 and $10.50,
respectively.
On April 10, 1997, the date before the public announcement of the agreement
in principle as to the Merger price of $14.25 per share, the high and low bid
prices per share for the Common Stock were $12.75 and $12.75, respectively.
On , 1997, the most recent practicable date before the printing of
this Proxy Statement, the high and low bid prices per share for the Common
Stock were $ and $ , respectively, and shares of Common Stock
were issued and outstanding among record holders.
HOLDERS OF COMMON STOCK ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR
THE COMMON STOCK.
DIVIDENDS
The Company has paid cash dividends since January 1986. Prior to 1986, the
Company did not declare or pay any cash dividends. During the past two fiscal
years and current interim periods, the Company has paid quarterly cash
dividends per share, as follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
First Quarter................................................. $.01 $.01 $.01
Second Quarter................................................ .01 .01 .01
Third Quarter................................................. .01 .01 .01
Fourth Quarter................................................ .01 .01 --
</TABLE>
52
<PAGE>
CERTAIN INFORMATION CONCERNING GOLD KIST, AGRI AND MERGER SUB
GOLD KIST
Gold Kist is a diversified agricultural cooperative association whose
business is conducted primarily in the Southeastern United States. Gold Kist
serves approximately 30,000 active farmer members and other cooperative
associations in both marketing products and commodities and purchasing
supplies and equipment. Gold Kist also conducts broiler and pork production
operations, providing both marketing and purchasing services to producers.
Gold Kist also purchases or manufactures feed, seed, fertilizers, pesticides,
animal health products and other farm supply items for sale at wholesale and
retail. Additionally, Gold Kist is engaged in the processing, storage and
marketing of cotton, serves as a contract procurement agent for, and stores,
farm commodities such as soybeans and grain, and is a partner in a major
peanut processing and marketing business and in a pecan processing and
marketing business.
Gold Kist owns all of the issued and outstanding capital stock of Agri,
which is the record holder of 10,901,802 shares of Common Stock of the Company
and the owner of all of the issued and outstanding capital stock of Merger
Sub. As of the date of this Proxy Statement, the Directors and officers of
Gold Kist are as set forth under the "Directors and Executive Officers of the
Company, Gold Kist, Merger Sub and the Surviving Corporation--Information
Concerning Directors and Executive Officers of Gold Kist and Merger Sub." The
Directors of Gold Kist have approved the Merger Agreement.
MERGER SUB
Merger Sub, a wholly owned subsidiary of Agri, is a Georgia corporation
organized for the sole purpose of effectuating the merger. As of the date of
this Proxy Statement, the Directors and officers of Merger Sub are as set
forth under "Directors and Executive Officers of the Company, Gold Kist,
Merger Sub and the Surviving Corporations--Information Concerning Directors
and Executive Officers of Gold Kist and Merger Sub." The Directors and sole
shareholder of Merger Sub have approved the Merger Agreement. Until the
consummation of the Merger, it is not anticipated that Merger Sub will have
any significant assets or liabilities (other than those arising under the
Merger Agreement or in connection with the Merger and the transactions
contemplated thereby) or engage in any activities other than those incident to
its formation and capitalization and the Merger.
GENERAL
The business address of Gold Kist, Agri and Merger Sub is 244 Perimeter
Center Parkway, N.E., Atlanta, Georgia 30346. The telephone number of Gold
Kist, Agri and Merger Sub is (770) 393-5000.
53
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY,
GOLD KIST, MERGER SUB AND THE SURVIVING CORPORATION
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Board of Directors of the Company is divided into three classes, with
the terms of office of each Class ending in successive years. At the present
time, there are three directors in Class I, four directors in Class II and
four directors in Class III.
The following table sets forth the name of each director and a description
of his positions and offices with the Company, if any; a brief description of
his principal occupation and business experience during at least the last five
years; certain directorships presently held by him in companies other than the
Company; and certain other information including his age. Unless otherwise
indicated, the address of each director and executive officer of the Company,
Gold Kist and Merger Sub is that of the Company at 244 Perimeter Center
Parkway, N.E., Atlanta, Georgia 30346. Each person listed below is a citizen
of the United States.
CLASS I DIRECTORS
TERM EXPIRING ANNUAL MEETING 1999
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME INFORMATION ABOUT DIRECTOR DIRECTOR
---- -------------------------- ----------
<C> <S> <C>
P. J. Gibbons...... Mr. Gibbons has been Vice President--Finance 1982
for Gold Kist since 1978. He is 59.
J. L. Stewart...... Mr. Stewart is Vice President--Marketing for 1986
the Gold Kist Poultry Group, a position he
has held since 1981. He is 56.
H. R. Holding...... Mr. Holding served as Vice Chairman of the 1993
Board--Finance Administration for BellSouth
Corporation, Atlanta, Georgia, from March
1991 until his retirement in August 1993. He
previously served as Vice President and
Senior Financial Officer of BellSouth
Corporation from May 1987 until January 1988
and as Executive Vice President--Chief
Financial Officer of BellSouth Corporation
from January 1988 until March 1991. Mr.
Holding serves as Trustee of the Emerald
Mutual Funds. He is 62.
</TABLE>
CLASS II DIRECTORS
TERM EXPIRING ANNUAL MEETING 1997
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME INFORMATION ABOUT DIRECTOR DIRECTOR
---- -------------------------- ----------
<C> <S> <C>
H. O. Chitwood..... Mr. Chitwood is Chief Executive Officer- 1982
Retired of Gold Kist. He previously served as
Chairman of the Board of Directors of the
Company from October 1992 until October 1995.
He served as Vice Chairman of the Board of
Directors from 1986 until his election as
Chairman. In addition, he served as Chief
Executive Officer of Gold Kist from October
1991 until October 1995. Mr. Chitwood served
as Chief Executive Officer of the Company
from 1986 until 1988 and as President from
1982 to 1986. He also served as Executive
Vice President and Chief Operating Officer of
Gold Kist from 1989 to October 1991, as
Executive Vice President of Gold Kist from
1988 until 1989, and as Executive Vice
President, Gold Kist Poultry Group, from 1984
until 1988. He is 66.
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME INFORMATION ABOUT DIRECTOR DIRECTOR
---- -------------------------- ----------
<C> <S> <C>
G. O. Coan......... Mr. Coan is Vice Chairman of the Board of 1982(1)
Directors of the Company. He is also Chief
Executive Officer of Gold Kist, a position he
has held since October 1995. He previously
served as President and Chief Operating
Officer of Gold Kist from October 1991 until
his election as Chief Executive Officer.
Previously he served as Executive Vice
President of Gold Kist from 1990 to October
1991. He also served as President of Golden
Peanut Company, a peanut procurement,
processing and marketing company
headquartered in Atlanta, Georgia, from 1986
until 1990. Mr. Coan is a Director of the
Archer Daniels Midland Company. He is 60.
K. N. Whitmire..... Mr. Whitmire is Chief Executive Officer of 1986
the Company, a position he has held since
1988 and has served as a Director of the
Company since 1986. He is also Group Vice
President of the Gold Kist Poultry Group. He
previously served as Vice President--
Operations of the Gold Kist Poultry Group
from 1981 until 1988. He is 58.
J. H. Levergood.... Mr. Levergood is currently President, 1987
Broadband Communications Group of Scientific-
Atlanta, Inc., in Atlanta, Georgia, a
worldwide supplier of communications
products, defense systems and test
instruments for industrial,
telecommunications, and government
applications. He was previously a
telecommunications consultant in Atlanta,
Georgia and served from 1989 to 1990 as
President of Dowden Communications, a
telecommunications consulting firm in
Atlanta, Georgia. From 1983 to 1989, Mr.
Levergood was President and Chief Operating
Officer of Scientific-Atlanta, Inc. He is a
Director of the Electronic Industry
Association Communication Group and Special
Audiences, Inc. He also serves as a Senior
Member of the Society of Cable Television
Engineers. He is 62.
CLASS III DIRECTORS
TERM EXPIRING ANNUAL MEETING 1998
<CAPTION>
YEAR FIRST
ELECTED
NAME INFORMATION ABOUT DIRECTOR DIRECTOR
---- -------------------------- ----------
<C> <S> <C>
W. W. Gaston....... Mr. Gaston is Chief Executive Officer-Retired 1982
of Gold Kist. Previously Mr. Gaston served as
Chief Executive Officer of Gold Kist from
1984 to 1988, as President of Gold Kist from
1978 to 1984, as Chairman of the Gold Kist
Management Executive Committee from 1978 to
1988, and as a Member of the Gold Kist
Management Executive Committee until his
retirement in 1989. Mr. Gaston is Chairman of
the Boards of Directors of Cotton States
Mutual Insurance Company and Cotton States
Life and Health Insurance Company. Mr. Gaston
is also a member of the Advisory Council of
SunTrust Banks of Georgia, Inc. He is 70.
</TABLE>
- --------
(1) Mr. Coan served as a Director from 1982 to 1986 and was reelected as
Director in 1991.
55
<PAGE>
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED
NAME INFORMATION ABOUT DIRECTOR DIRECTOR
---- -------------------------- ----------
<C> <S> <C>
J. W. McIntyre..... Mr. McIntyre served as Chairman of the Board 1991
of The Citizens and Southern National Bank
from 1986 until his retirement in December
1991. He previously served as President of
The Citizens and Southern National Bank, as
Vice Chairman of the Board of The Citizens
and Southern Corporation and as Chairman of
the Board and Chief Executive Officer of The
Citizens and Southern Georgia Corporation.
Mr. McIntyre serves as a Trustee of the
Global Health Sciences Fund, Gables
Residential Trust, and Invesco Mutual Funds.
He is 66.
D. W. Sands........ Mr. Sands has been Chief Executive Officer 1982
Emeritus of Gold Kist since October 1991.
Previously, Mr. Sands served as President and
Chief Executive Officer of Gold Kist from
1988 until his retirement in October 1991.
From 1984 through 1988, Mr. Sands served as
President and Chief Operating Officer of Gold
Kist. He is 69.
J. Bekkers......... Mr. Bekkers has been Chairman of the Board of 1995
Directors of the Company since October 1995.
He previously served as Vice President of the
Company, having been elected to that office
in July 1995. He is also President and Chief
Operating Officer of Gold Kist, having been
elected to that office in October 1995. He
previously served as Executive Vice President
of Gold Kist from October 1994 until his
election as President. Mr. Bekkers served as
the Division Manager of the Gold Kist
Northeast Alabama Poultry Division from May
1988 until October 1994. He is a Director of
Farm Credit Leasing Corporation. He is 51.
</TABLE>
OTHER EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth the name of each executive officer of the
Company not described above and a description of his positions and offices
with the Company; a brief description of his business experience during at
least the last five years; and certain other information including his age.
<TABLE>
<CAPTION>
NAME INFORMATION ABOUT OFFICER
---- -------------------------
<C> <S>
E. C. Ragans....... Mr. Ragans has been Division President since October 1988
and Chief Operating Officer of the Company since June
1988. From June 1988 until October 1996, Mr. Ragans also
served as President of the Company. From 1982 until 1988,
he served as Division manager of the Gold Kist West
Georgia Poultry Division. He is 50.
N. R. Robinson..... Mr. Robinson has served as Division President of the
Company since October 1996. From 1990 until October 1996,
Mr. Robinson served as Vice President of the Company and
was Division Manager of the Russellville, Alabama,
operations of the Company prior thereto. Mr. Robinson
previously served as Assistant Division Manager of the
Gold Kist Northeast Alabama Poultry Division from 1988
until 1989, and as Field Operations Manager of the Gold
Kist Northeast Georgia Poultry Division from 1983 until
1988. He is 57.
S. L. Prince....... Mr. Prince has served as Division President of the
Company since October 1996. From January 1995 until
October 1996, Mr. Prince served as Vice President of the
Company. Mr. Prince previously served as Division Sales
Manager for the Company's Russellville complex from
December 1990 until January 1995, and as a sales
representative for the Gold Kist West Georgia Poultry
Division from August 1987 until December 1990. He is 38.
</TABLE>
56
<PAGE>
<TABLE>
<CAPTION>
NAME INFORMATION ABOUT OFFICER
---- -------------------------
<C> <S>
D. W. Mabe......... Mr. Mabe has served as President of Carolina Golden since
January 1991. From June 1988 until election to his
current position, he served as Division Manager of the
Gold Kist West Georgia Poultry Division. Mr. Mabe was
Processing Plant Manager for the Gold Kist West Georgia
Poultry Division prior to his assignment as Division
Manager. He is 43.
J. L. Lawing....... Mr. Lawing has served as Secretary of the Company since
August 1982 and as General Counsel and Vice President
since 1990. Prior thereto, Mr. Lawing served as Vice
President--Law and Corporate Secretary of Gold Kist from
1976 until 1990. He is 59.
L. C. Thomas, Jr. . Mr. Thomas has served as Treasurer and Chief Financial
Officer of the Company since June 1986 and as manager of
Financial Reporting for Gold Kist since June 1983. He is
43.
</TABLE>
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF GOLD KIST AND MERGER SUB
Set forth below is the name of each Director and executive officer of Gold
Kist and Merger Sub and, unless disclosed elsewhere in this Proxy Statement,
the present principal occupation or employment of each such person and a brief
description of his principal occupation and business experience during at
least the last five years. Each person listed below is a citizen of the United
States.
The Directors of Gold Kist are elected on a district representation basis.
The districts are redrawn from time to time by the Board of Directors, under
provisions of the By-Laws of Gold Kist, to provide for equitable
representation of members in the territory served by Gold Kist. During the
past five years, each of the Directors has owned and managed substantial
farming operations, producing such agricultural products as peanuts, cotton,
soybeans, corn, other grains, peaches, vegetable crops, cattle, poultry and
dairy products. While the size of products produced on, and personnel employed
at, each of the Director's farms varies, each Director's business activities
have been related primarily to small agribusiness enterprises. There are no
family relationships among any of the Directors and executive officers.
The Directors of Gold Kist are:
<TABLE>
<CAPTION>
TERM
NAME INFORMATION ABOUT DIRECTOR EXPIRES
---- -------------------------- -------
<C> <S> <C>
W. P. Smith, Jr. .. Mr. Smith has served as Chairman of the Board of 1998
Directors since October 1995 and has served as a
Director representing District 1 since 1973.
H. A. Daniel , Mr. Daniel has served as a Director representing 1998
Jr. .............. District 2 since 1995.
F. K. Norris, Jr. . Mr. Norris has served as a Director representing 1997
District 3 since 1977.
J. E. Brady, Jr. .. Mr. Brady has served as a Director representing 1999
District 4 since 1984.
W. K. Whitehead.... Mr. Whitehead has served as a Director 1999
representing District 5 since 1993.
D. Smalley......... Mr. Smalley has served as a Director 1999
representing District 6 since 1985.
A. J. Nally........ Mr. Nally has served as a Director representing 1997
District 7 since 1991.
M. M. Davis........ Mr. Davis has served as a Director representing 1997
District 8 since 1994.
P. Ogletree, Jr. .. Mr. Ogletree has served as a Director 1998
representing District 9 since 1977.
</TABLE>
57
<PAGE>
The following table sets forth the name of each executive officer of Gold
Kist and a description of his positions and offices with Gold Kist and certain
other information including his age. Unless otherwise set forth below, each of
the following executive officers has been an officer or employee of Gold Kist
during the past five years.
The executive officers of Gold Kist are:
<TABLE>
<CAPTION>
NAME INFORMATION ABOUT OFFICER
---- -------------------------
<C> <S>
G. O. Coan......... Mr. Coan has served as Chief Executive Officer and
Chairman of the Management Executive Committee of Gold
Kist since 1995. Mr. Coan is also Vice Chairman of the
Board of Directors of the Company. He previously served
as President and Chief Operating Officer of Gold Kist
from October 1991 until his election as Chief Executive
Officer. Previously he served as Executive Vice President
of Gold Kist from 1990 to October 1991. He also served as
President of Golden Peanut Company, a peanut procurement,
processing and marketing company headquartered in
Atlanta, Georgia, from 1986 until 1990. Mr. Coan is a
Director of the Archer Daniels Midland Company. He is 60.
J. Bekkers......... Mr. Bekkers has served as President and Chief Operating
Officer of Gold Kist since 1995. Mr. Bekkers has also
served as Chairman of the Board of Directors of the
Company since October 1995. He previously served as Vice
President of the Company, having been elected to that
office in July 1995. He previously served as Executive
Vice President of Gold Kist from October 1994 until his
election as President. Mr. Bekkers served as the Division
Manager of the Gold Kist Northeast Alabama Poultry
Division from May 1988 until October 1994. He is a
Director of Farm Credit Leasing Corporation. He is 51.
M. A. Stimpert..... Mr. Stimpert has served as Senior Vice President,
Planning and Administration since 1996. For five months
prior thereto, Mr. Stimpert served as Vice President of
Gold Kist. For ten years prior thereto, Mr. Stimpert
served as Executive Vice President of Golden Peanut
Company, a peanut processing and marketing company
headquartered in Atlanta, Georgia. He is 52.
K. N. Whitmire..... Mr. Whitmire has served as Group Vice President, Poultry
Group since 1988. Mr. Whitmire is also Chief Executive
Officer of the Company, a position he has held since 1988
and has served as a Director of the Company since 1986.
He is also Group Vice President of the Gold Kist Poultry
Group. He previously served as Vice President--Operations
of the Gold Kist Poultry Group from 1981 until 1988. He
is 58.
J. L. Lawing....... Mr. Lawing has served as the General Counsel, Vice
President and Secretary of Gold Kist since 1976. He is
59.
P. J. Gibbons...... Mr. Gibbons has served as Vice President-Finance for Gold
Kist since 1978. He is 59.
P. G. Brower....... Mr. Brower has served as Vice President, Communications
since 1978. He is 57.
W. A. Epperson..... Mr. Epperson has served as Vice President of Human
Resources since 1978. He is 60.
J. L. Stewart...... Mr. Stewart has served as Vice President, Marketing of
the Poultry Group since 1981. He is 56.
J. K. McLaughlin... Mr. McLaughlin has served as Vice President, Pet Food and
Animal Products Division since 1984. He is 58.
A. C. Merritt...... Mr. Merritt has served as Vice President, Fertilizer and
Chemical Division since 1983. He is 50.
S. C. Rogers....... Mr. Rogers has served as Vice President, AgriServices
Division since 1990. He is 50.
M. F. Thrailkill... Mr. Thrailkill has served as Vice President, Information
Services since 1992. He is 48.
S. O. West......... Mr. West has served as Treasurer since 1983. He is 50.
W. F. Pohl, Jr. ... Mr. Pohl has served as Controller since 1982. He is 46.
</TABLE>
58
<PAGE>
The current Directors of Merger Sub are J. Bekkers, Chairman, G. O. Coan and
K. N. Whitmire. The current executive officers of Merger Sub are J. Bekkers,
President, G. O. Coan, Vice President, J. L. Lawing, Secretary and S. O. West,
Treasurer. Each of such Directors and officers are currently Directors and/or
officers of the Company and/or Gold Kist. Certain biographical information
regarding Messrs. Bekkers, Coan, Whitmire, Lawing and West is set forth under
"--Information Concerning Directors and Executive Officers of the Company" and
"--Information Concerning Directors and Executive Officers of Gold Kist and
Merger Sub."
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF THE SURVIVING CORPORATION
In accordance with the terms of the Merger Agreement, the Directors of the
Surviving Corporation are to be the current directors of Merger Sub. The
executive officers of the Company will continue to serve as executive officers
of the Surviving Corporation.
SECURITY OWNERSHIP OF THE COMPANY
The following table sets forth information as of March 31, 1997, with
respect to the beneficial ownership of each person who is known by the Company
to be the beneficial owner of more than 5% of the outstanding shares of the
Company's Common Stock, each Director, the Company's Chief Executive Officer,
its other four most highly compensated executive officers whose salary and
bonus for the fiscal year ended June 29, 1996, exceeded $100,000 and all of
the Company's Directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1)(2) OF CLASS
- ------------------------ ----------------- --------
<S> <C> <C>
Gold Kist Inc....................................... 10,901,802(3) 75%
H. O. Chitwood...................................... 71,798 *
W. W. Gaston........................................ 44,126 *
H. R. Holding....................................... 3,278 *
J. H. Levergood..................................... 6,563 *
D. W. Mabe.......................................... 9,762 *
J. W. McIntyre...................................... 9,680 *
S. L. Prince........................................ 1,869 *
E. C. Ragans........................................ 26,343 *
N. R. Robinson...................................... 5,095 *
D. W. Sands......................................... 102,325 *
Directors and executive officers as a Group (17
persons)........................................... 285,989 1.91%
</TABLE>
- --------
(1) Information relating to beneficial ownership of Common Stock by persons
set forth in this table is based upon information furnished by each such
individual using "beneficial ownership" concepts set forth in rules
promulgated by the Commission under Section 13(d) of the Exchange Act.
Persons set forth in this table possessed sole voting and investment power
with respect to all shares set forth by their names.
(2) Includes those shares shown below as to which the following persons have a
right to acquire upon the exercise of options which are presently
exercisable or will become exercisable within 60 days after March 31,
1997: (i) Mr. Chitwood--52,396 shares; Mr. Prince--1,869 shares; Mr.
Ragans--18,478 shares; Mr. Robinson--4,793 shares; Mr. Sands--33,275
shares; and (ii) all Directors and executive officers as a group--110,811
shares.
(3) Gold Kist's shares are owned through its wholly owned subsidiary Agri.
Gold Kist exercises sole voting and investment power with respect to all
10,901,802 shares.
* Less than one percent.
59
<PAGE>
PURCHASES OF COMMON STOCK BY CERTAIN PERSONS
The following table sets forth certain information concerning purchases of
Common Stock since June 26, 1994 by the Company, Gold Kist or its
subsidiaries, and by Directors and executive officers of the Company:
<TABLE>
<CAPTION>
NUMBER OF PRICE
SHARES PER WHERE AND HOW
NAME DATE PURCHASED SHARE TRANSACTION EFFECTED
---- -------- --------- -------- ----------------------
<S> <C> <C> <C> <C>
Agri........................ 12/8/94 27,443 $ 5.75 Nasdaq National Market
12/23/96 20,303 13.00 (1)
1/2/97 62,358 13.00 (1)
1/3/97 100,469 13.00 (1)
1/6/97 56,038 13.00 (1)
1/7/97 847 13.00 (1)
1/8/97 48,552 13.00 (1)
1/9/97 10,828 13.00 (1)
J. Bekkers.................. 2/9/95 10,000 6.00 Nasdaq National Market
1/9/97 375 6.00 (1)
G. O. Coan.................. 1/8/97 6,050 4.8554 (1)
1/8/97 7,865 5.8810 (1)
1/8/97 5,900 6.4772 (1)
1/8/97 1,788 6.50 (1)
1/8/97 750 6.00 (1)
W. W. Gaston................ 2/3/95 3,000 6.25 Nasdaq National Market
5/2/95 2,600 6.375 Nasdaq National Market
1/3/97 12,100 8.2145 (1)
P. J. Gibbons............... 1/2/97 1,210 8.2145 (1)
1/2/97 605 6.0954 (1)
1/2/97 907 4.8554 (1)
1/2/97 909 5.8810 (1)
1/2/97 682 6.4772 (1)
1/2/97 206 6.50 (1)
1/2/97 103 6.00 (2)
Golden Poultry Company,
Inc. ...................... 1/19/95 43,090 6.00 Nasdaq National Market
2/2/95 15,000 6.00 Nasdaq National Market
3/8/95 33,300 6.25 Nasdaq National Market
3/10/95 55,700 6.375 Nasdaq National Market
4/12/95 100,000 6.10 Nasdaq National Market
5/19/96 10,000 8.9375 Nasdaq National Market
J. L. Lawing................ 1/2/97 1,210 8.2145 (1)
1/2/97 605 6.0954 (1)
1/2/97 907 4.8554 (1)
1/2/97 909 5.8810 (1)
1/2/97 682 6.4772 (1)
1/2/97 206 6.50 (1)
1/2/97 103 6.00 (1)
</TABLE>
60
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PRICE
SHARES PER WHERE AND HOW
NAME DATE PURCHASED SHARE TRANSACTION EFFECTED
---- ------- --------- -------- ------------------------
<S> <C> <C> <C> <C>
J. L. Stewart............... 1/3/97 4,840 $ 8.2145 (1)
1/3/97 2,420 6.0954 (1)
1/3/97 3,630 4.8554 (1)
1/3/97 4,235 5.8810 (1)
1/3/97 3,177 6.4772 (1)
1/3/97 962 6.50 (1)
1/3/97 481 6.00 (1)
L. C. Thomas, Jr. .......... 4/14/97 1,210 8.2415 (2)
4/14/97 605 6.0954 (2)
4/14/97 907 4.8554 (2)
4/14/97 909 5.8881 (2)
4/14/97 682 6.4772 (2)
4/14/97 206 6.50 (2)
4/14/97 103 6.00 (2)
K. N. Whitmire.............. 1/6/97 6,050 8.2145 (1)
1/6/97 3,630 6.0954 (1)
1/6/97 4,840 4.8554 (1)
1/6/97 5,445 5.8810 (1)
1/6/97 4,085 6.4772 (1)
1/6/97 1,238 6.50 (1)
1/6/97 500 6.00 (1)
</TABLE>
- --------
(1) Acquisition of Common Stock from Directors and officers of Gold Kist per
the Final Judgment and Decree in the Windham Lawsuit. See "Special
Factors--Background of the Merger."
(2) Acquisition through the exercise of employee stock options granted
pursuant to the Company's Incentive Plan. See "The Merger Agreement--
Options."
TRANSACTION OF OTHER BUSINESS
The Board of Directors knows of no other matters which may be presented at
the Special Meeting, but if other matters do properly come before the meeting,
it is intended that the persons named in the proxy will vote, pursuant to
their discretionary authority, according to their best judgment in the
interest of the Company.
INDEPENDENT AUDITORS
The consolidated financial statements of the Company as of June 25, 1994,
July 1, 1995 and June 29, 1996, and for years ended June 25, 1994, July 1,
1995 and June 29, 1996, included herein have been audited by KPMG Peat Marwick
LLP, independent auditors, as indicated in their report with respect thereto.
SHAREHOLDER PROPOSALS
If the Merger is not consummated for any reason, proposals of shareholders
intended to be presented at the 1998 Annual Meeting of Shareholders must be
received by the Company at its principal executive offices on or prior to
, to be eligible for inclusion in the Company's Proxy Statement
and form of proxy relating to that meeting. Shareholders should mail any
proposals by certified mail, return receipt requested.
61
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
000-14960) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement:
1. The Company's Annual Report on Form 10-K for the fiscal year ended June
29, 1996;
2. The Company's Current Report on Form 8-K dated July 8, 1996; and
3. The Company's Quarterly Reports on Form 10-Q for the quarters ended
September 28, 1996 and December 28, 1996.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement and prior to the date of the Special Meeting shall be deemed to be
incorporated by reference into this Proxy Statement and to be a part hereof
from the date of filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes hereof to the extent that
a statement contained herein (or in any other subsequently filed document that
is or is deemed to be incorporated by reference herein) modifies or supersedes
such previous statement. Any statement so modified or superseded shall not be
deemed to constitute a part hereof except as so modified or superseded. All
information appearing in this Proxy Statement is qualified in its entirety by
the information and financial statements (including the notes thereto)
appearing in the documents incorporated by reference.
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN CERTAIN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS DELIVERED, ON
WRITTEN OR ORAL REQUEST, IN THE CASE OF DOCUMENTS RELATING TO THE COMPANY,
FROM GOLDEN POULTRY COMPANY, INC., 244 PERIMETER CENTER PARKWAY, N.E.,
ATLANTA, GEORGIA 30346, ATTENTION: CORPORATE SECRETARY, TELEPHONE: (770) 393-
5000. IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO THE SPECIAL
MEETING, REQUESTS MUST BE RECEIVED BY JULY , 1997.
By order of the Board of Directors,
Jack L. Lawing,
Secretary
Atlanta, Georgia
June , 1997
PLEASE COMPLETE AND RETURN YOUR PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
62
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
UNAUDITED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of December 28, 1996 and December 30,
1995...................................................................
Consolidated Statements of Operations for the six months ended December
28, 1996 and December 30, 1995.........................................
Consolidated Statements of Cash Flows for the six months ended December
28, 1996 and December 30, 1995.........................................
Notes to Consolidated Financial Statements..............................
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report............................................
Consolidated Balance Sheets as of July 1, 1995 and June 29, 1996........
Consolidated Statements of Operations for the years ended June 25, 1994,
July 1, 1995 and
June 29, 1996..........................................................
Consolidated Statements of Shareholders' Equity for the years ended June
25, 1994, July 1, 1995 and June 29, 1996...............................
Consolidated Statements of Cash Flows for the years ended June 25, 1994,
July 1, 1995 and
June 29, 1996..........................................................
Notes to Consolidated Financial Statements..............................
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
Golden Poultry Company, Inc.:
We have audited the accompanying consolidated balance sheets of Golden
Poultry Company, Inc. and subsidiary as of July 1, 1995 and June 29, 1996, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the three-year period ended June 29, 1996.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Golden
Poultry Company, Inc. and subsidiary as of July 1, 1995 and June 29, 1996, and
the results of their operations and their cash flows for each of the years in
the three-year period ended June 29, 1996, in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
August 2, 1996
F-1
<PAGE>
GOLDEN POULTRY COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 2,720 2,599
Trade accounts receivable less allowance for
doubtful accounts of $264
in 1995 and $31 in 1996........................... 21,632 23,654
Inventories (note 1(c))............................ 46,781 54,903
Other.............................................. 1,635 2,468
-------- -------
Total current assets.............................. 72,768 83,624
-------- -------
Property, plant and equipment, net (notes 1(d) and
3)................................................. 79,573 73,738
Other assets....................................... 3,263 6,617
-------- -------
$155,604 163,979
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (note 3)......... $ 1,036 585
Short-term borrowings from Gold Kist (notes 3 and
7)................................................. 9,221 --
Accounts payable................................... 19,325 26,292
Due to Gold Kist (note 7).......................... 5,075 1,207
Income taxes payable (note 2)...................... 485 2,705
Accrued compensation and related expenses.......... 4,688 8,300
-------- -------
Total current liabilities......................... 39,830 39,089
-------- -------
Long-term debt, excluding current portion (note 3).. 12,425 4,840
Other liabilities (note 6).......................... 4,509 5,495
-------- -------
Total liabilities................................. 56,764 49,424
-------- -------
Minority interest in consolidated partnership....... 9,954 10,198
Shareholders' equity (note 4):
Preferred stock, $1.00 par value. Authorized 1,000
shares; no shares issued.......................... -- --
Common stock, no stated par value. Authorized
20,000 shares;
issued 14,866 shares at July 1, 1995 and 14,882
shares at June 29, 1996........................... 65,363 65,464
Retained earnings.................................. 25,653 41,112
-------- -------
91,016 106,576
Less treasury stock, at cost, 348 shares at July 1,
1995
and 358 shares at June 29, 1996.................... 2,130 2,219
-------- -------
Total shareholders' equity........................ 88,886 104,357
Contingencies (notes 7 and 9).......................
-------- -------
$155,604 163,979
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
GOLDEN POULTRY COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------
JUNE 25, 1994 JULY 1, 1995 JUNE 29, 1996
------------- ------------ -------------
<S> <C> <C> <C>
Net sales (includes $95,787, $124,275
and $161,409 to Gold Kist)
(notes 7 and 8)...................... $447,139 505,975 600,237
Cost of sales (includes purchases of
$37,576, $44,522 and
$59,930 from Gold Kist) (note 7)..... 427,607 486,064 552,184
-------- ------- -------
Gross profit........................ 19,532 19,911 48,053
Selling, administrative and general
expenses (includes administrative
expenses of $6,041, $6,042 and $7,713
paid to Gold Kist)
(notes 5, 6 and 7)................... 16,122 16,687 20,999
-------- ------- -------
Operating income.................... 3,410 3,224 27,054
-------- ------- -------
Other (expense) income:
Interest expense (includes interest
expense of $988, $1,073 and $1,113
paid to Gold Kist) (notes 1(d), 3
and 7).............................. (1,311) (1,703) (1,459)
Interest income...................... 67 12 7
Miscellaneous, net................... 299 381 208
-------- ------- -------
(945) (1,310) (1,244)
-------- ------- -------
Earnings before minority interest
and income taxes................... 2,465 1,914 25,810
Minority interest in partnership
(earnings) loss...................... 3,259 1,965 (243)
-------- ------- -------
Earnings before income taxes........ 5,724 3,879 25,567
Income tax expense-(note 2)........... 1,676 1,132 9,526
-------- ------- -------
Net earnings........................ $ 4,048 2,747 16,041
======== ======= =======
Net earnings per share (notes 1(f) and
4)................................... $ .27 .19 1.10
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
GOLDEN POULTRY COMPANY, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 25, 1994, JULY 1, 1995
AND JUNE 29, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------- RETAINED TREASURY SHAREHOLDERS'
SHARES AMOUNT EARNINGS STOCK EQUITY
------ -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 26, 1993....... 14,859 $ 65,308 20,000 -- 85,308
Net earnings................... -- -- 4,048 -- 4,048
Purchase of treasury stock..... -- -- -- (608) (608)
Shares awarded................. 3 27 -- -- 27
Cash dividends at $.037 per
share.......................... -- -- (555) -- (555)
------ -------- ------ ------ -------
Balance at June 25, 1994....... 14,862 65,335 23,493 (608) 88,220
Net earnings................... -- -- 2,747 -- 2,747
Purchase of treasury stock..... -- -- -- (1,522) (1,522)
Shares awarded................. 4 28 -- -- 28
Cash dividends at $.04 per
share.......................... -- -- (587) -- (587)
------ -------- ------ ------ -------
Balance at July 1, 1995........ 14,866 65,363 25,653 (2,130) 88,886
Net earnings................... -- -- 16,041 -- 16,041
Purchase of treasury stock..... -- -- -- (89) (89)
Shares issued under stock
option plan.................... 12 75 -- -- 75
Shares awarded................. 4 26 -- -- 26
Cash dividends at $.04 per
share.......................... -- -- (582) -- (582)
------ -------- ------ ------ -------
Balance at June 29, 1996....... 14,882 $ 65,464 41,112 (2,219) 104,357
====== ======== ====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GOLDEN POULTRY COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------------------
JUNE 25, 1994 JULY 1, 1995 JUNE 29, 1996
------------- ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings......................... $ 4,048 2,747 16,041
Non-cash items included in net
earnings:
Depreciation........................ 16,411 16,905 15,499
Minority interest in partnership
earnings (loss)..................... (3,259) (1,965) 243
Deferred income taxes............... (1,463) (1,437) (1,490)
Other............................... 768 738 1,133
Changes in operating assets and
liabilities:
Trade accounts receivable.......... (2,589) (3,719) (2,022)
Inventories........................ (7,536) (5,090) (8,122)
Accounts payable and accrued
compensation and related expenses. 4,401 2,010 10,579
Due to Gold Kist................... 1,727 (799) (3,868)
Income taxes....................... (232) 243 2,220
Other.............................. 110 (13) (128)
------- ------ -------
Net cash provided by operating
activities........................ 12,386 9,620 30,085
------- ------ -------
Cash flows from investing activities:
Acquisitions of property, plant and
equipment............................ (21,661) (9,011) (12,571)
Other................................ 117 118 192
------- ------ -------
Net cash used in investing
activities........................ (21,544) (8,893) (12,379)
------- ------ -------
Cash flows from financing activities:
Capital contributed to partnership by
Gold Kist............................ 11,760 2,940 --
Repayments of long-term debt, payable
to Gold Kist......................... (11,760) (8,240) --
Short-term borrowings, net, payable
to Gold Kist......................... 879 6,648 (9,221)
Proceeds from long-term debt......... 7,000 -- --
Principal payments of long-term debt. (1,175) (1,186) (8,036)
Dividends paid....................... (555) (587) (582)
Purchase of treasury shares.......... (608) (1,522) (89)
Other................................ 27 28 101
------- ------ -------
Net cash provided by (used in)
financing activities.............. 5,568 (1,919) (17,827)
------- ------ -------
Net change in cash and cash
equivalents........................... (3,590) (1,192) (121)
Cash and cash equivalents at beginning
of year............................... 7,502 3,912 2,720
------- ------ -------
Cash and cash equivalents at end of
year.................................. $ 3,912 2,720 2,599
======= ====== =======
Supplemental disclosure of cash flow
information:
Cash paid during the years for:
Interest (net of amounts
capitalized)........................ $ 1,491 1,657 1,536
Income taxes........................ $ 3,371 2,326 8,796
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 1994, JULY 1, 1995 AND JUNE 29, 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Golden Poultry Company, Inc. is a fully integrated broiler producer which is
majority owned by Gold Kist Inc. (Gold Kist). The Company is headquartered in
Atlanta, Georgia and operates four poultry complexes located in the Southeast.
The Company's principal activities include broiler production, processing and
marketing. The Company includes Golden Poultry Company, Inc., a consolidated
partnership and a subsidiary. The accounting reporting policies of the Company
conform to generally accepted accounting principles and to general practice in
the poultry industry. The following is a summary of the significant accounting
policies.
(A) BASIS OF PRESENTATION
The accompanying consolidated financial statements reflect the
accounts of Golden Poultry Company, Inc. and its subsidiary, GP Finance
Corporation, and Carolina Golden Products Company, a general
partnership in which the Company holds a 51% interest. The remaining
49% ownership interest in Carolina Golden Products is held by Gold
Kist. All significant intercompany balances and transactions have been
eliminated in consolidation. The Company recognizes revenues from sales
when products are shipped to the customers.
Effective July 23, 1993, the Company and Gold Kist contributed $24.0
million of partnership equity to Carolina Golden Products Company in
the same proportion as their respective ownership percentages. The
Company's equity contribution of $12.2 million represented conversion
of existing short-term financing provided to Carolina Golden Products
Company. Gold Kist's equity contribution of $11.8 million to the
partnership was used to repay long-term debt owed to Gold Kist.
Effective January 1, 1995, the Company and Gold Kist contributed $6.0
million of partnership equity to Carolina Golden Products in the same
proportion as their respective ownership percentages.
(B) CASH AND CASH EQUIVALENTS
The Company's policy is to invest cash in excess of operating
requirements in highly liquid interest bearing debt instruments which
include commercial paper and reverse repurchase agreements. These
investments are stated at cost which approximates market.
For purposes of the consolidated statements of cash flows, the
Company considers all highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents.
(C) INVENTORIES
Live poultry consists of broilers and breeders. Broilers are stated
at the lower of average cost or market and breeders are stated at
average cost less accumulated amortization. Inventories of feed, eggs
and supplies are stated at the lower of cost (first-in, first-out or
average) or market. Marketable products are stated at net realizable
value. The Company hedges varying amounts of its poultry feed
ingredient purchases to minimize the risk of adverse price
fluctuations. Futures contracts are accounted for as hedges and option
contracts are accounted for at market. Gains or losses on futures and
options transactions are included as adjustments to product cost.
F-6
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Inventories consist of the following:
<TABLE>
<CAPTION>
1995 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Live poultry................................................ $26,234 32,255
Feed, eggs and supplies..................................... 11,512 13,069
Marketable products......................................... 9,035 9,579
------- ------
$46,781 54,903
======= ======
</TABLE>
(D) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation of
plant and equipment is calculated using the straight-line method over
the estimated useful lives of the respective assets.
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1995 1996
-------- -------
<S> <C> <C>
(IN THOUSANDS)
Land...................................................... $ 4,543 4,543
Land improvements......................................... 6,956 6,998
Buildings................................................. 52,201 53,216
Machinery and equipment................................... 100,249 105,697
Construction in progress.................................. 3,032 2,603
-------- -------
166,981 173,057
Less accumulated depreciation............................. 87,408 99,319
-------- -------
$ 79,573 73,738
======== =======
</TABLE>
The Company capitalized interest costs of $226,000, $93,000 and
$72,000 as a component of the cost of major asset construction for the
years 1994, 1995 and 1996, respectively.
(E) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized as income or expense in the period that includes the
enactment date.
(F) EARNINGS PER SHARE
Net earnings per share are based on the weighted average number of
shares outstanding for each year, which was 14,858,000 for 1994,
14,690,000 for 1995 and 14,524,000 for 1996. The dilutive effect of
stock options is not significant.
(G) FISCAL YEAR
The Company employs a 52/53 week fiscal year. The consolidated
financial statements for 1994, 1995 and 1996 reflect 52, 53 and 52 week
years, respectively. Fiscal 1997 will be a 52 week year.
F-7
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(H) FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company's financial instruments include primarily cash and cash
equivalents, trade receivables and payables and debt. Because of the
short maturity of cash equivalents, trade receivables and payables,
certain short-term debt which matures in less than one year and long-
term debt with variable interest rates, the carrying value approximates
fair value. The Company's financial instruments are considered to have
an estimated fair value which approximates carrying value at June 29,
1996.
(I) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from these estimates.
(2) INCOME TAXES
The provision for income tax expense from operations consists of the
following:
<TABLE>
<CAPTION>
1994 1995 1996
---------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
Current:
Federal........................................... $ 2,810 2,272 9,984
State............................................. 329 297 1,032
-------- ------- -------
3,139 2,569 11,016
-------- ------- -------
Deferred:
Federal........................................... (1,350) (1,301) (1,384)
State............................................. (113) (136) (106)
-------- ------- -------
(1,463) (1,437) (1,490)
-------- ------- -------
Total............................................ $ 1,676 1,132 9,526
======== ======= =======
The Company's combined federal and state effective tax rates from
operations for 1994, 1995 and 1996 were 32.2%, 29.2% and 37.3%,
respectively. The federal statutory rate was 34% for 1994 and 1995 and 35%
for 1996. A reconciliation of income tax expense from operations for the
applicable year follows:
<CAPTION>
1994 1995 1996
---------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
Income tax expense at statutory rate............... $ 1,946 1,319 8,948
State income tax expense, net of Federal income
tax................................................ 217 196 671
Targeted jobs credits.............................. (299) (315) --
Other.............................................. (188) (68) (93)
-------- ------- -------
$1,676 1,132 9,526
======== ======= =======
</TABLE>
F-8
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at July 1, 1995 and June 29, 1996 are as
follows:
<TABLE>
<CAPTION>
1995 1996
------ -----
(IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued employee compensation expense...................... $2,784 3,967
Depreciation............................................... 1,525 1,945
State tax operating loss carryforwards..................... 535 482
Other...................................................... 366 253
------ -----
Gross deferred tax assets................................. 5,210 6,647
Valuation allowance........................................ (535) (482)
------ -----
Net deferred tax assets................................... $4,675 6,165
====== =====
</TABLE>
The Company's management believes the existing net deductible temporary
differences comprising the total net deferred tax assets will reverse during
periods in which the Company generates net taxable income.
(3) SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1996
------- -----
(IN
THOUSANDS)
<S> <C> <C>
Revolving credit agreement with a commercial bank (weighted
average rate of 6.7% at July 1, 1995)......................... $ 7,000 --
Colbert County, Alabama tax-exempt industrial development bonds
with floating interest rates dated February 1, 1990 payable in
annual installments of $450 with final installment of $2,050
due on February 1, 2002; secured by Colbert County feed mill.. 4,750 4,300
Douglas-Coffee County, Georgia tax-exempt industrial
development bonds with floating interest rates dated December
31, 1985 payable in quarterly installments of $153 with final
installment of $145 due on January 1, 1996; secured by Coffee
County feed mill.............................................. 451 --
Promissory term note, to an individual, dated May 4, 1987,
interest at 9% payable in monthly installments of $20 for
fifteen years with final payment due on June 1, 2002; secured
by distribution facilities.................................... 1,260 1,125
------- -----
Total long-term debt......................................... 13,461 5,425
Less current portion........................................... 1,036 585
------- -----
Long-term debt, excluding current portion.................... $12,425 4,840
======= =====
</TABLE>
The effective interest rates for 1995 and 1996 were 3.7% and 3.9%,
respectively, on the Colbert County, Alabama industrial development bonds.
A concurrent exchange agreement of the Company's interest obligation on the
Douglas-Coffee County, Georgia industrial development bonds for another
party's obligations, with respect to interest payments on an equivalent amount
of fixed-rate indebtedness, reduces the Company's exposure to fluctuations in
the floating rate. The effective interest rates for 1995 and 1996 were 7.4%
and 3.8%, respectively.
F-9
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
During August 1996, the Company extended its $25 million revolving credit
and term loan facility with a commercial bank. The revolver extends to 1998,
when the outstanding borrowings may be converted to a term loan payable in
quarterly installments over five years. An annual commitment fee of .375% is
payable quarterly on the unused portion of the revolver. The revolving credit
facility bears interest at prime or below. In addition, the Company has a $15
million revolving credit facility with Gold Kist. The revolving credit
facility with Gold Kist bears interest at prime. There were no outstanding
borrowings under these facilities at June 29, 1996.
Under provisions of the industrial development bonds and the revolving
credit and term loan facility, the Company is required to maintain certain
financial ratios and a minimum level of working capital. The Company is also
required to maintain specified amounts of tangible net worth. Other provisions
impose restrictions on future borrowings.
Annual required principal repayments of existing long-term debt (assumes
revolving credit agreement will be converted to a term loan) for the five
fiscal years subsequent to June 29, 1996 are as follows (in thousands):
<TABLE>
<S> <C>
Years ending:
June 28, 1997....................................................... $585
June 27, 1998....................................................... 612
June 26, 1999....................................................... 627
July 1, 2000........................................................ 644
July 1, 2001........................................................ 662
</TABLE>
(4) SHAREHOLDERS' EQUITY
On January 27, 1994, the Board of Directors approved a 10% stock dividend,
which was issued on February 24, 1994 to shareholders of record on February
10, 1994. All share and per share data and shareholders' equity account
balances in the accompanying consolidated financial statements have been
retroactively adjusted to reflect the additional shares outstanding resulting
from the stock dividends.
(5) EMPLOYEE BENEFITS
The Company participates in two noncontributory multiemployer defined
benefit pension plans of Gold Kist which cover substantially all employees
meeting the service requirements. The Company also participates in the
voluntary Profit Sharing and Investment Plan of Gold Kist. Total pension
expense charged to the Company's operations was $606,000 for 1994, $713,000
for 1995 and $744,000 for 1996.
The Company has a long-term incentive plan which allows the Board of
Directors to grant incentive stock options and award common stock to
employees, officers and certain directors. Under the terms of the plan,
756,250 shares of the Company's common stock may be issued for options granted
and stock awards. At July 1, 1995 and June 29, 1996, incentive stock options
outstanding were 265,002 shares and 266,374 shares, respectively, with
exercise prices per share ranging from $4.86 to $8.22. At June 29, 1996,
incentive stock options exercisable were 212,989 shares. These options are
exercisable up to ten years after the date of grant. At June 29, 1996, options
for 12,385 common shares had been exercised under this plan.
(6) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides health care and death benefits to substantially all
retired employees, covered dependents and their beneficiaries. Generally,
employees who have attained age 55 and who have 10 years of service are
eligible for these benefits. In addition, employees with less than 10 years of
service who retired before
F-10
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
July 1, 1992 are eligible for these benefits. The health care and death
benefit plans are contributory and coverages increase with increased years of
service. The cost of postretirement benefits other than pensions has been
recognized on an accrual basis as employees perform services to earn the
benefits.
Postretirement health and death benefit expenses for 1994, 1995 and 1996
included the following components:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- -----
<S> <C> <C> <C>
Service cost--benefits earned during the year................... $470 514 664
Interest cost................................................... 239 299 361
---- --- -----
$709 813 1,025
==== === =====
</TABLE>
The Company's postretirement benefit plans are not funded. The status of the
plans at July 1, 1995 and June 29, 1996 was as follows:
<TABLE>
<CAPTION>
JULY 1, 1995 JUNE 29, 1996
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
ACTUARIAL PRESENT VALUE OF ACCUMULATED
POSTRETIREMENT BENEFIT OBLIGATION:
Retirees.......................................... $ 890 923
Fully eligible active plan participants........... 646 924
Other active plan participants.................... 2,825 4,018
------ -----
4,361 5,865
Unrecognized prior service cost................... -- (149)
Unrecognized net loss from experience differences. -- (187)
------ -----
$4,361 5,529
====== =====
</TABLE>
The health care cost trend rate used to determine the accumulated
postretirement benefit obligation at July 1, 1995 was 9%, declining ratably to
5% by the year 2001 and remaining at that level thereafter. The health care
cost trend rate used to determine the accumulated postretirement benefit
obligation at June 29, 1996 was 8%, declining ratably to 5% by the year 2001
and remaining at that level thereafter. The discount rate used to determine
the accumulated postretirement benefit obligation was 8.00% at July 1, 1995
and June 29, 1996, respectively. A one-percent increase in the health care
cost trend rate for each year would increase the accumulated postretirement
benefit obligation at June 29, 1996 by approximately 16% and net
postretirement health care cost by 17%.
F-11
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(7) RELATED PARTY TRANSACTIONS
A summary of the transactions with Gold Kist follows:
<TABLE>
<CAPTION>
YEARS ENDED
----------------------------
JUNE 25, JULY 1, JUNE 29,
1994 1995 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Due to Gold Kist and long-term debt and short-
term borrowings, payable to Gold Kist, beginning
balance......................................... $ 25,841 16,687 14,296
Transactions included in the consolidated
statements of operations:
Sales.......................................... (95,787) (124,275) (161,409)
Purchases at market prices..................... 32,318 38,898 50,261
Purchases at cost.............................. 5,258 5,624 9,669
Administrative expenses........................ 6,041 6,042 7,713
Interest expense............................... 988 1,073 1,113
Miscellaneous expense, net..................... 35 42 43
Capital contributed to partnership.............. (11,760) (2,940) --
Dividends to Gold Kist.......................... 394 424 424
Net cash transferred from Gold Kist............. 53,359 72,721 79,097
-------- -------- --------
Due to Gold Kist and current portion of long-term
debt and short-term borrowings, payable to Gold
Kist, ending balance............................ $ 16,687 14,296 1,207
======== ======== ========
</TABLE>
Sales and purchases of dressed and further processed poultry products with
Gold Kist approximate current market prices. Purchases of feed ingredients,
finished feed and live broilers from Gold Kist are at cost. Administrative
expenses represent management services, including incentive compensation, paid
to Gold Kist by the Company.
Gold Kist provides, for the Company, certain administrative, staff, and
operating functions pursuant to a management services agreement which is
renewable annually. The Company pays to Gold Kist an amount representing Gold
Kist's cost in providing these functions, plus 5.8% of the Company's earnings
before income taxes if the rate of return on assets employed exceeds 10%, or
3.5% of earnings before income taxes if the rate of return on assets employed
is positive, but is less than 10%. The Company paid $5.8 million, $5.9 million
and $6.2 million for 1994, 1995 and 1996, respectively, representing Gold
Kist's cost, exclusive of the incentive amounts based on earnings, to provide
these functions. The incentive compensation amounts paid to Gold Kist for
1994, 1995 and 1996 were $200,000, $136,000 and $1,483,000, respectively.
Gold Kist provides a revolving credit facility with advances available up to
$15 million bearing interest at prime. At June 29, 1996, there were no amounts
outstanding under the revolving credit facility (see note 3).
As of June 29, 1996, financing for approximately 363 broiler and breeder
houses operated by the Company's contract growers was provided by AgraTrade
Financing, Inc., a wholly-owned subsidiary of Gold Kist. The Company has
agreed to indemnify AgraTrade Financing for an amount equal to fifty percent
of credit losses related to loans and/or leases made to the Company's contract
growers. At June 29, 1996, AgraTrade Financing had lease and loan agreements
with contract growers for approximately $28.0 million. As of June 29, 1996,
there have been no credit losses related to the loans and leases guaranteed
under this agreement, which has been in effect since October 1988.
F-12
<PAGE>
GOLDEN POULTRY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(8) SUPPLEMENTAL FINANCIAL INFORMATION
In each of the years ended 1994, 1995 and 1996, 22%, 20% and 19%,
respectively, of the Company's net sales were to one customer, a major grocery
store chain located in Georgia and Florida. At June 29, 1996, receivables from
this customer represented 25% of the Company's trade accounts receivable.
(9) CONTINGENCIES
In January 1993, certain Alabama member patrons of Gold Kist Inc. filed a
lawsuit in the Circuit Court of Jefferson County, Alabama, Tenth Judicial
Circuit against the Company and Gold Kist Inc. and certain directors and
officers of the companies. (Ronald Pete Windham and Windham Enterprises, Inc.
on their behalf and on behalf of and for the use and benefit of Gold Kist,
Inc. and its shareholders/members v. Harold O. Chitwood, individually in his
capacity as an officer of Gold Kist and a Director of Golden Poultry; et al).
The lawsuit alleged that the named defendants violated their fiduciary duties
by diverting corporate opportunities from Gold Kist to the Company and
Carolina Golden Products Company in connection with the creation of the
Company and Carolina Golden Products Company and by permitting their continued
operations. Among the remedies requested were the transfer of the Company's
operations to Gold Kist. In March 1994, the Court certified the Windham
litigation as a class action. In September 1995, the Company and Carolina
Golden Products Company were dismissed from the litigation. On October 25,
1995, the jury in the Windham case returned verdicts in favor of the
plaintiffs in the litigation. On July 2, 1996, the Jefferson County, Alabama
Circuit Court Judge entered an Order in the case directing Gold Kist to
acquire the approximately 27% of Company shares currently owned by investors
so that all of the issued and outstanding stock of the Company would be owned
by Gold Kist. On September 13, 1996, subsequent to Motions for Reconsideration
filed by the plaintiffs and Gold Kist, the Court entered a Final Judgment and
Decree amending its July 2, 1996 Order. The Final Judgment and Decree relieves
Gold Kist of the requirement to acquire the 27% of Golden Poultry common stock
not already owned by Gold Kist. This Final Judgment and Decree requires Gold
Kist to acquire or redeem all Golden Poultry common stock and/or stock options
held or issued to Gold Kist officers and directors. There are approximately
309,000 shares and options of Golden Poultry common stock owned by Gold Kist
officers and directors. The Company is also party to other various legal and
administrative proceedings, all of which management believes constitute
ordinary routine litigation incident to the business conducted by the Company,
or are not material in amount.
(10) QUARTERLY FINANCIAL DATA (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL 1996 QUARTERS
--------------------------------
FIRST SECOND THIRD FOURTH
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales...................................... $143,624 144,242 153,496 158,875
Gross profit................................... 11,303 14,316 5,658 16,776
Net earnings................................... 4,002 5,100 940 5,999
Net earnings per share......................... .28 .35 .06 .41
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 QUARTERS
---------------------------------
FIRST SECOND THIRD FOURTH
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales..................................... $127,243 117,859 119,931 140,942
Gross profit.................................. 4,962 3,900 5,181 5,868
Net earnings (loss)........................... 834 (28) 653 1,288
Net earnings (loss) per share................. .06 .00 .04 .09
</TABLE>
F-13
<PAGE>
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
DEC. 28, 1996 JUNE 29, 1996
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalent.......................... $ 3,395 $ 2,599
Trade accounts receivable less allowance for
doubtful accounts of $33 at Dec. 28, 1996 and $31
at June 29, 1996................................. 27,102 23,654
Inventories (note 3).............................. 63,002 54,903
Other............................................. 5,443 2,468
-------- --------
Total current assets........................... 98,942 83,624
-------- --------
Property, plant and equipment, net................. 94,974 73,738
Other assets....................................... 4,843 6,617
-------- --------
$198,759 $163,979
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt................. $ 599 $ 585
Short-term borrowings from Gold Kist (note 4)..... 7,282 --
Accounts payable.................................. 33,185 26,292
Due to Gold Kist.................................. 5,260 1,207
Income taxes payable.............................. 289 2,705
Accrued compensation and related expenses......... 6,692 8,300
-------- --------
Total current liabilities...................... 53,307 39,089
-------- --------
Long-term debt, excluding current portion.......... 17,754 4,840
Other liabilities.................................. 5,495 5,495
-------- --------
Total liabilities.............................. 76,556 49,424
-------- --------
Minority interest in consolidated partnership...... 11,582 10,198
Shareholders' equity:
Preferred stock, $1.00 par value. Authorized 1,000
shares; no shares issued......................... -- --
Common stock, no stated par value. Authorized
20,000 shares; issued 14,886 shares at Dec. 28,
1996 and 14,882 at June 29, 1996................. 65,507 65,464
Retained earnings................................. 47,333 41,112
-------- --------
112,840 106,576
Less treasury stock, at cost, 358 shares at Dec.
28, 1996 and June 29, 1996....................... 2,219 2,219
-------- --------
Total shareholders' equity..................... 110,621 104,357
Contingency (note 5)
-------- --------
$198,759 $163,979
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-14
<PAGE>
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
------------------ ------------------
DEC. 28, DEC. 30, DEC. 28, DEC. 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales.............................. $182,004 $144,242 $357,704 $287,866
Cost of sales.......................... 169,637 129,926 334,326 262,247
-------- -------- -------- --------
Gross profit.......................... 12,367 14,316 23,378 25,619
Selling, administrative and general
expenses............................... 5,617 5,449 10,923 10,551
-------- -------- -------- --------
Operating income...................... 6,750 8,867 12,455 15,068
Other (expense) income:
Interest expense...................... (362) (324) (618) (779)
Miscellaneous, net.................... (65) 79 58 155
-------- -------- -------- --------
(427) (245) (560) (624)
-------- -------- -------- --------
Earnings before minority interest and
income taxes........................... 6,323 8,622 11,895 14,444
Minority interest in partnership (gain)
loss................................... (1,114) (258) (1,385) 305
-------- -------- -------- --------
Earnings before income taxes.......... 5,209 8,364 10,510 14,749
Income tax expense..................... 1,995 3,264 3,998 5,647
-------- -------- -------- --------
Net earnings.......................... $ 3,214 $ 5,100 $ 6,512 $ 9,102
======== ======== ======== ========
Net earnings per share................. $ .22 $ .35 $ .45 $ .63
Weighted average outstanding shares.... 14,526 14,522 14,525 14,519
Cash dividends per share............... $ .01 $ .01 $ .02 $ .02
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-15
<PAGE>
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------
DEC. 28, DEC. 30,
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.............................................. $ 6,512 $ 9,102
Non-cash items included in net earnings:
Depreciation............................................. 6,423 8,720
Minority interest in partnership gain (loss)............. 1,385 (305)
Deferred taxes........................................... (866) (388)
Other.................................................... 99 74
Changes in operating assets and liabilities:
Trade accounts receivable................................. (3,447) (105)
Inventories............................................... (8,099) (2,410)
Accounts payable and accrued compensation and related
expenses................................................. 5,286 7,655
Due to Gold Kist.......................................... 3,380 (2,855)
Income taxes.............................................. (2,416) 456
Other..................................................... (2,843) (2,456)
-------- --------
Net cash provided by operating activities.............. 5,414 17,488
-------- --------
Cash flows from investing activities:
Acquisitions of property, plant and equipment............. (25,271) (4,110)
Other..................................................... 61 55
-------- --------
Net cash used in investing activities.................. (25,210) (4,055)
-------- --------
Cash flows from financing activities:
Short-term borrowings (repayments), net, payable to Gold
Kist..................................................... 7,954 (3,877)
Principal payments of long-term debt...................... (72) (7,372)
Proceeds from long-term debt.............................. 13,000 --
Dividends paid............................................ (290) (290)
-------- --------
Net cash provided by (used in) financing activities.... 20,592 (11,539)
-------- --------
Net change in cash and cash equivalents................ 796 1,894
Cash and cash equivalents at beginning of period........... 2,599 2,720
-------- --------
Cash and cash equivalents at end of period................. $ 3,395 $ 4,614
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the periods for:
Interest (net of amounts capitalized).................... $ 618 $ 772
======== ========
Income taxes............................................. $ 7,280 $ 5,578
======== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
F-16
<PAGE>
GOLDEN POULTRY COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
1. The accompanying unaudited consolidated financial statements reflect the
accounts of Golden Poultry Company, Inc. and its subsidiary and a majority
owned partnership, Carolina Golden Products Company (collectively, "the
Company"). These consolidated financial statements should be read in
conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations and the Notes to Consolidated Financial
Statements on pages 11 through 15 and pages 22 through 29, respectively, of
the Company's Annual Report in the previously filed Form 10-K for the year
ended June 29, 1996.
2. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position,
results of operations, and cash flows. Results of operations for interim
periods are not necessarily indicative of results for the entire year.
3. Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 28, JUNE 29,
1996 1996
------------ --------
<S> <C> <C>
Live poultry........................................... $38,182 $32,255
Feed, eggs, and supplies............................... 14,854 13,069
Marketable products.................................... 9,966 9,579
------- -------
$63,002 $54,903
======= =======
</TABLE>
4. The amounts outstanding represent borrowings by Carolina Golden Products
under a $15.0 million Revolving Credit Agreement with Gold Kist.
5. In January 1993, certain Alabama member patrons of Gold Kist Inc. filed a
lawsuit in the Circuit Court of Jefferson County, Alabama, Tenth Judicial
Circuit against the Company and Gold Kist Inc. and certain directors and
officers of the companies. (Ronald Pete Windham and Windham Enterprises,
Inc. on their behalf and on behalf of and for the use and benefit of Gold
Kist, Inc. and its shareholders/members v. Harold O. Chitwood, individually
in his capacity as an officer of Gold Kist and a Director of Golden
Poultry; et al). The lawsuit alleges that the named defendants violated
their fiduciary duties by diverting corporate opportunities from Gold Kist
to the Company and Carolina Golden Products Company in connection with the
creation of the Company and Carolina Golden Products Company and by
permitting their continued operations. Among the remedies requested were
the transfer of the Company's operations to Gold Kist. In March 1994, the
Court certified the Windham litigation as a class action. In September
1995, the Company and Carolina Golden Products Company were dismissed from
the litigation. On October 25, 1995, the jury in the Windham case returned
verdicts in favor of the plaintiffs in the litigation. On July 2, 1996, the
Jefferson County, Alabama Circuit Court Judge entered a memorandum opinion
and non-final judgment in the case directing Gold Kist to acquire the
approximately 27% of Company shares currently owned by investors so that
all of the issued and outstanding stock of the Company would be owned by
Gold Kist. The Court denied the plaintiffs' demands for additional
allocations and cash distributions to the class members. On September 13,
1996, subsequent to Motions for Reconsideration filed by the plaintiffs and
Gold Kist, the Court entered a Final Judgment and Decree amending its July
2, 1996 Order. The Final Judgment and Decree, clarified and reaffirmed by
order of the Court dated November 4, 1996, relieves Gold Kist of the
requirement to acquire the 27% of Golden Poultry common stock not already
owned by Gold Kist. This Final Judgment and Decree requires Gold Kist to
acquire or redeem all Golden Poultry common stock and/or stock options held
or issued to Gold Kist officers and directors. On December 16, 1996, the
F-17
<PAGE>
Final Judgment and Decree became final and non-appealable. Pursuant to the
Final Judgment and Decree, Gold Kist purchased 299,395 shares of Golden
Poultry common stock owned by Gold Kist officers and directors in December
1996 and January 1997. The Company is also party to other various legal and
administrative proceedings, all of which management believes constitute
ordinary routine litigation incident to the business conducted by the
Company, or are not material in amount.
F-18
<PAGE>
EXHIBIT A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF
APRIL 22, 1997
AMONG
GOLDEN POULTRY COMPANY, INC.,
GOLD KIST INC.,
AGRI INTERNATIONAL, INC.
AND
GOLDEN POULTRY ACQUISITION CORP.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
<TABLE>
<C> <S> <C>
SECTION 1.1 Company Action 4
1.2 The Merger 5
1.3 Conversion of Shares 5
1.4 Surrender and Payment 5
1.5 Dissenting Shares 6
1.6 Stock Options 6
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 Articles of Incorporation 7
2.2 Bylaws 7
2.3 Directors and Officers 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Corporate Existence and Power 7
3.2 Corporate Authorization 7
3.3 Governmental Authorization 7
3.4 Non-Contravention 7
3.5 Capitalization 7
3.6 Company Subsidiaries 8
3.7 SEC Filings 8
3.8 Financial Statements 8
3.9 Disclosure Documents 8
3.10 Finders' and Bankers' Fees 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.1 Corporate Existence and Power 9
4.2 Corporate Authorization 9
4.3 Governmental Authorization 9
4.4 Non-Contravention 9
4.5 Disclosure Documents 9
4.6 Finders' and Bankers' Fees 9
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1 Conduct of the Company 10
5.2 Shareholder Meeting; Proxy Material 10
5.3 Access to Information 11
5.4 Other Potential Bidders 11
5.5 Notices of Certain Events 11
</TABLE>
-2-
<PAGE>
ARTICLE VI
COVENANTS OF BUYER
<TABLE>
<C> <S> <C>
SECTION 6.1 Voting of Shares 11
6.2 Director and Officer Liability 11
6.3 Notices of Certain Events 12
6.4 Split Dollar Life Insurance 12
ARTICLE VII
COVENANTS OF BUYER AND THE COMPANY
SECTION 7.1 Best Efforts 12
7.2 Certain Filings 12
7.3 Public Announcements 13
7.4 Further Assurances 13
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1 Conditions to the Obligations of Each Party 13
Additional Conditions to the Obligations of Buyer and
8.2 Merger Subsidiary 13
8.3 Additional Conditions to the Obligations of the Company 14
ARTICLE IX
TERMINATION
SECTION 9.1 Termination 14
9.2 Effect of Termination 15
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Definitions 15
10.2 Notices 17
10.3 No Survival of Representations and Warranties 17
10.4 Amendments; No Waivers 17
10.5 Fees and Expenses 18
10.6 Successors and Assigns 18
10.7 Governing Law 18
10.8 Severability 18
10.9 Captions 18
10.10 Interpretations 18
10.11 Counterparts; Effectiveness 18
</TABLE>
-3-
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of April 22, 1997, by and among
GOLDEN POULTRY COMPANY, INC., a Georgia corporation (the "Company"), GOLD KIST
INC., a Georgia cooperative ("Gold Kist"), AGRI INTERNATIONAL, INC., a Georgia
corporation and a wholly owned subsidiary of Gold Kist ("Agri") (Gold Kist and
Agri are sometimes referred to collectively as "Buyer"), and GOLDEN POULTRY
ACQUISITION CORP., a Georgia corporation and a wholly owned subsidiary of Agri
("Merger Subsidiary").
WHEREAS:
A. The authorized capital stock of the Company consists of (i) 20,000,000
shares of common stock, no par value (the "Company Common Stock"), of which
14,628,435 shares were issued and outstanding as of close of business on April
19, 1997, and (ii) 1,000,000 shares of Preferred Stock, $1 par value (the
"Preferred Stock"), none of which shares are issued and outstanding as of the
date hereof.
B. Agri currently owns, and immediately prior to the Effective Time will
own, 10,901,802 shares of Company Common Stock representing 75% of the total
issued and outstanding Company Common Stock.
C. A special negotiating committee of the Board of Directors of the Company
appointed on January 23, 1997 and comprised entirely of directors who are
neither members of management of the Company nor affiliated with Buyer or any
Affiliate of Buyer (other than the Company) (the "Special Committee") has
unanimously determined that the Merger is fair to and in the best interests of
the shareholders of the Company other than Buyer (the "Public Shareholders")
and has unanimously approved this Agreement and unanimously recommends its
approval and adoption by the Board of Directors and by the shareholders of the
Company.
D. The Board of Directors of the Company, based in part on the
recommendation of the Special Committee, determined that the Merger is fair
and in the best interests of the Public Shareholders and has resolved to
approve and adopt this Agreement and the transactions contemplated hereby and,
subject to the terms and conditions set forth herein, to recommend the
approval and adoption of this Agreement and the Merger by the shareholders of
the Company.
E. The Board of Directors of the Company, and Gold Kist, Agri and Merger
Subsidiary, subject to the approvals of their respective Boards of Directors,
each have approved the merger of Merger Subsidiary with and into the Company
(the "Merger") in accordance with the Georgia Business Corporation Code (the
"GBCC") with respect to the Company, Agri and Merger Subsidiary, and the
Georgia Cooperative Marketing Act (the "GCMA") with respect to Gold Kist, and
the terms and conditions provided below, pursuant to which each Share (other
than Shares held by the Company as treasury stock, Shares owned by Buyer
immediately prior to the Effective Time and Shares as to which appraisal
rights have been perfected) shall be converted into the right to receive the
Merger Consideration.
F. Certain capitalized terms used herein are defined in Section 10.1.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
representations, warranties and agreements herein contained, the parties
hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 COMPANY ACTION. The Company represents that its Board of
Directors, at a meeting duly called and held and acting, in part, on the
unanimous recommendation of the Special Committee, has (i) unanimously
determined that this Agreement and the transactions contemplated hereby,
including the Merger, are fair to and in the best interests of the Public
Shareholders, (ii) unanimously approved and adopted this
-4-
<PAGE>
Agreement and the transactions contemplated hereby, including the Merger, and
(iii) unanimously resolved to recommend approval and adoption of this
Agreement and the Merger by the Company's shareholders, provided, that such
recommendation may be withdrawn, modified or amended by the Board of Directors
of the Company if the Board deems such withdrawal, modification or amendment
necessary in light of its fiduciary obligations to the Company's shareholders
after consultation with counsel.
SECTION 1.2 THE MERGER. (a) At the Effective Time, Merger Subsidiary shall
be merged with and into the Company in accordance with the GBCC, whereupon the
separate existence of Merger Subsidiary shall cease, and the Company shall be
the Surviving Corporation.
(b) As soon as practicable after satisfaction or, to the extent permitted
hereunder, waiver of all conditions to the Merger, the Company and Merger
Subsidiary will file a certificate of merger with the Secretary of State of
the State of Georgia and make all other filings or recordings required by the
GBCC in connection with the Merger. The Merger shall become effective at such
time as such certificate of merger is duly filed with the Secretary of State
of the State of Georgia or at such later time as is specified in such
certificate of merger (the "Effective Time").
(c) From and after the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises and be subject to
all of the restrictions, disabilities and duties of the Company and Merger
Subsidiary, all as provided under the GBCC.
SECTION 1.3 CONVERSION OF SHARES. At the Effective Time:
(a) each share of Company Common Stock (a "Share") outstanding immediately
prior to the Effective Time shall, except as otherwise provided in Section
1.3(b) or as provided in Section 1.5 with respect to Shares as to which
appraisal rights have been perfected, be converted into the right to receive
$14.25 in cash, without interest (the "Merger Consideration");
(b) each Share held by the Company as treasury stock, and each Share held by
Agri, immediately prior to the Effective Time shall be canceled, and no
payment shall be made with respect thereto; and
(c) each share of common stock of Merger Subsidiary outstanding immediately
prior to the Effective Time shall be converted into and become one share of
common stock of the Surviving Corporation with the same rights, powers and
privileges as the shares so converted and shall constitute the only
outstanding shares of capital stock of the Surviving Corporation.
SECTION 1.4 SURRENDER AND PAYMENT. (a) At or prior to the Effective Time,
the Company shall appoint SunTrust Bank, Atlanta as agent (the "Exchange
Agent") for the purpose of exchanging certificates representing Shares for the
Merger Consideration. At the Effective Time, Agri shall, and Gold Kist shall
cause Agri to, make available to the Exchange Agent the Merger Consideration
to be paid in respect of all outstanding Shares entitled thereto as to which
appraisal rights have not been exercised. At or prior to the Effective Time,
the Company or Surviving Corporation will send, or will cause the Exchange
Agent to send, to each holder of Shares at the Effective Time a letter of
transmittal for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only upon proper
delivery of the certificates representing Shares to the Exchange Agent).
(b) Each holder of Shares that have been converted into a right to receive
the Merger Consideration, upon surrender to the Exchange Agent of a
certificate or certificates representing such Shares, together with a properly
completed letter of transmittal covering such Shares, will be entitled to
receive the Merger Consideration payable in respect of such Shares. Until so
surrendered, each such certificate shall, after the Effective Time, represent
for all purposes, only the right to receive such Merger Consideration.
-5-
<PAGE>
(c) If any portion of the Merger Consideration is to be paid to a Person
other than the registered holder of the Shares represented by the certificate
or certificates surrendered in exchange therefor, it shall be a condition to
such payment that the certificate or certificates so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
Person requesting such payment shall pay to the Exchange Agent any transfer or
other taxes required as a result of such payment to a Person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further registration of
transfers of Shares. If, after the Effective Time, certificates representing
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for the Merger Consideration provided for, and in accordance with
the procedures set forth, in this Article I.
(e) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to Section 1.4(a) that remains unclaimed by the holders of
Shares one year after the Effective Time shall be returned within one week
after the end of such one year period, without further action or request, to
the Buyer, and any such holder who has not exchanged his Shares for the Merger
Consideration in accordance with this Section prior to that time shall
thereafter look only to the Buyer for payment of the Merger Consideration in
respect of his Shares. Notwithstanding the foregoing, neither Buyer nor the
Surviving Corporation shall be liable to any holder of Shares for any amount
paid to a public official pursuant to applicable abandoned property Laws. Any
amounts remaining unclaimed by holders of Shares two years after the Effective
Time (or such earlier date immediately prior to such time as such amounts
would otherwise escheat to or become property of any governmental entity)
shall, to the extent permitted by applicable Law, become the property of the
Buyer free and clear of any claims or interest of any Person previously
entitled thereto; provided, however, that nothing herein shall limit the
obligations of the Buyer under Section 1.4(b).
SECTION 1.5 DISSENTING SHARES. Notwithstanding Section 1.3, Shares
outstanding immediately prior to the Effective Time and held by a holder who
has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with the GBCC shall not
be converted into a right to receive the Merger Consideration, but shall be
converted into the right to receive such consideration as may be determined to
be due in respect of such dissenting Shares pursuant to Article 13 of the
GBCC; provided, however, that if the holder of such dissenting Shares shall
have failed to perfect or shall have waived, rescinded or otherwise lost (in
each such instance, to the reasonable satisfaction of the Surviving
Corporation) its status as a "dissenting shareholder" pursuant to Article 13
of the GBCC, then such holder of dissenting Shares shall forfeit the right to
dissent from the Merger and such Shares shall thereupon be deemed to have been
converted into the right to receive, as of the Effective Time, the Merger
Consideration. The Company shall give Buyer prompt notice of any demands
received by the Company for appraisal of Shares, and Buyer shall have the
right to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of
Buyer, make any payment with respect to, or settle or offer to settle, any
such demands.
SECTION 1.6 STOCK OPTIONS. Buyer and the Company shall take all steps
reasonably necessary such that, pursuant to Section 7.1 of the Company's 1988
Long-Term Incentive Plan (the "Incentive Plan"), the Company shall give
written notice to the holders of all options ("Options") granted under the
Incentive Plan that are outstanding on the date hereof that (a) such Options
shall be exercisable in full on a date that is at least thirty days prior to
the date on which the Effective Time is expected to occur, and (b) that all
Options that are not exercised during such thirty-day period will terminate.
In addition, the written notice to each such holder shall include an offer by
Buyer to pay for the cancellation of such holder's Options an amount in cash
determined by multiplying (1) the excess, if any, of the Merger Consideration
over the applicable exercise price per share of the Option by (2) the number
of Shares such holder could have purchased had such holder exercised such
Option in full immediately prior to the Effective Time, and each such Option
shall thereafter be canceled.
-6-
<PAGE>
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 ARTICLES OF INCORPORATION. The articles of incorporation of the
Company in effect at the Effective Time shall be the articles of incorporation
of the Surviving Corporation until amended in accordance with applicable Law.
SECTION 2.2 BYLAWS. The bylaws of the Company in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable Law.
SECTION 2.3 DIRECTORS AND OFFICERS. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable Law, (i) the directors of Merger Subsidiary at the Effective Time
shall be the directors of the Surviving Corporation, and (ii) the officers of
the Company at the Effective Time shall be the officers of the Surviving
Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer that:
SECTION 3.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation duly
incorporated, validly existing and in good standing under the Laws of the
State of Georgia, and has all corporate powers and approvals required to carry
on its business as now conducted.
SECTION 3.2 CORPORATE AUTHORIZATION. The execution, delivery and performance
by the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby are within the Company's corporate powers
and, except for any required approval by the Company's shareholders in
connection with the consummation of the Merger, this Agreement will have been
duly authorized by all necessary corporate action. This Agreement constitutes
a valid and binding agreement of the Company.
SECTION 3.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation of the
Merger by the Company require no action by or in respect of, or filing with,
any Governmental Authority other than (i) the filing of a certificate of
merger in accordance with the GBCC; and (ii) compliance with applicable
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder (the "Exchange Act").
SECTION 3.4 NON-CONTRAVENTION. The execution, delivery and performance by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby do not and will not (i) contravene or
conflict with the articles of incorporation or bylaws of the Company, or (ii)
assuming compliance with the matters referred to in Section 3.3, contravene or
conflict with or constitute a violation of any provision of any Law or Order
binding upon or applicable to the Company or any Company Subsidiary.
SECTION 3.5 CAPITALIZATION. The authorized capital stock of the Company
consists of 20,000,000 authorized shares of Company Common Stock and 1,000,000
authorized shares of Preferred Stock. As of March 31, 1997, (a) 14,982,292
shares of Company Common Stock were issued and outstanding, (b) 358,479 shares
of Company Common Stock were held in the treasury of the Company, and (c)
151,422 shares of Company Common Stock were reserved for future issuance
pursuant to outstanding employee stock options granted pursuant to the
Incentive Plan. As of March 31, 1997, (a) no shares of Preferred Stock were
issued and outstanding, and (b) no shares of Preferred Stock were held in the
treasury of the Company. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in this Section and except for changes since March 31,
1997, resulting from the exercise of employee stock options outstanding on
such date, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company, and (iii) no options or other rights
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to acquire from the Company, and no obligation of the Company to issue, any
capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the Company (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the Company or any
Company Subsidiary to repurchase, redeem or otherwise acquire any Company
Securities.
SECTION 3.6 COMPANY SUBSIDIARIES. All of the outstanding capital stock of,
or other ownership interests in, each Company Subsidiary owned by the Company
is owned free and clear of any Lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests). There are no
outstanding (i) securities of the Company or any Company Subsidiary
convertible into or exchangeable for shares of capital stock or other voting
securities or ownership interests in any Company Subsidiary, and (ii) options
or other rights to acquire from the Company or, to the knowledge of the
Company, any Company Subsidiary, and no other obligation of the Company or, to
the knowledge of the Company, any Company Subsidiary to issue, any capital
stock, voting securities or other ownership interests in, or any securities
convertible into or exchangeable for any capital stock, voting securities or
ownership interests in, any Company Subsidiary (the items in clauses (i) and
(ii) being referred to collectively as the "Subsidiary Securities"). There are
no outstanding obligations of the Company or, to the knowledge of the Company,
any Company Subsidiary to repurchase, redeem or otherwise acquire any
outstanding Subsidiary Securities.
SECTION 3.7 SEC FILINGS. The Company has delivered to Buyer (i) the Annual
Report on Form 10-K for its fiscal year ended June 29, 1996 (the "Company 10-
K"), (ii) its proxy or information statements relating to meetings of, or
actions taken without a meeting by, the shareholders of the Company held since
October 23, 1996, and (iii) all of its other reports, statements, schedules
and registration statements filed with the Securities and Exchange Commission
(the "SEC") since June 29, 1996.
SECTION 3.8 FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company 10-K and in the Quarterly Reports on Form 10-Q
filed for quarterly periods of fiscal year 1997 (the "Company 10-Qs") fairly
present, in conformity with GAAP (except as may be indicated in the notes
thereto), the consolidated financial position of the Company and its
consolidated Company Subsidiaries as of the dates thereof and their
consolidated statements of operations and of cash flows for the periods then
ended (subject to normal year-end adjustments in the case of any unaudited
interim financial statements).
SECTION 3.9 DISCLOSURE DOCUMENTS. (a) Each document required to be filed by
the Company with the SEC in connection with the transactions contemplated by
this Agreement (the "Company Disclosure Documents"), including, without
limitation, the proxy statement of the Company (the "Company Proxy Statement")
to be filed with the SEC in connection with the Merger, and any amendments or
supplements thereto will, when filed, comply as to form in all material
respects with the applicable requirements of the Exchange Act.
(b) At the time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to shareholders of the Company, at the time such
shareholders vote on adoption of this Agreement, and at the Effective Time,
the Company Proxy Statement, as supplemented or amended, if applicable, will
not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. At the
time of the filing of any Company Disclosure Document other than the Company
Proxy Statement and at the time of any distribution thereof, such Company
Disclosure Document will not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
made therein, in the light of the circumstances under which they were made,
not misleading. The representations and warranties contained in this Section
3.9(b) will not apply to statements or omissions included in any Company
Disclosure Documents (including, without limitation, the Company Proxy
Statement) based upon information furnished to the Company in writing by Buyer
specifically for use therein.
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SECTION 3.10 FINDERS' AND BANKERS' FEES. Except for The Robinson-Humphrey
Company, Inc. ("R-H"), a copy of whose engagement agreement has been provided
to Buyer, there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf of the Company,
the Special Committee or any Company Subsidiary who might be entitled to any
fee or commission from Buyer or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Company that:
SECTION 4.1 CORPORATE EXISTENCE AND POWER. Each of Gold Kist, Agri and
Merger Subsidiary is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Georgia, and each has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to consummate the transactions contemplated by
this Agreement. Since the date of its incorporation, Merger Subsidiary has not
engaged in any material activities other than in connection with or as
contemplated by this Agreement.
SECTION 4.2 CORPORATE AUTHORIZATION. The execution, delivery and performance
by Gold Kist, Agri and Merger Subsidiary of this Agreement and the
consummation by Gold Kist, Agri and Merger Subsidiary of the transactions
contemplated hereby are within the corporate powers of Gold Kist, Agri and
Merger Subsidiary and, upon approval and adoption of this Agreement by the
respective Board of Directors of each such corporation, will have been duly
authorized by all necessary corporate action. This Agreement constitutes a
valid and binding agreement of Gold Kist, Agri and Merger Subsidiary.
SECTION 4.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Gold Kist, Agri and Merger Subsidiary of this Agreement and the
consummation by Gold Kist, Agri and Merger Subsidiary of the transactions
contemplated by this Agreement require no action by or in respect of, or
filing with, any Governmental Authority other than (i) the filing of a
certificate of merger in accordance with the GBCC and (ii) compliance with any
applicable requirements of the Exchange Act.
SECTION 4.4 NON-CONTRAVENTION. The execution, delivery and performance by
Gold Kist, Agri and Merger Subsidiary of this Agreement and the consummation
by Gold Kist, Agri and Merger Subsidiary of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the articles of
incorporation or bylaws of Gold Kist, Agri or Merger Subsidiary, or (ii)
assuming compliance with the matters referred to in Section 4.3, contravene or
conflict with any material provision of Law or Order binding upon or
applicable to Gold Kist, Agri or Merger Subsidiary.
SECTION 4.5 DISCLOSURE DOCUMENTS. The information with respect to Buyer and
its Affiliates that Buyer furnishes to the Company in writing specifically for
use in any Company Disclosure Document will not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in the light of the circumstances under
which they were made, not misleading (i) in the case of the Company Proxy
Statement at the time the Company Proxy Statement or any amendment or
supplement thereto is first mailed to shareholders of the Company, at the time
the shareholders vote on adoption of this Agreement and at the Effective Time,
and (ii) in the case of any Company Disclosure Document other than the Company
Proxy Statement, at the time of the filing thereof and at the time of any
distribution thereof.
SECTION 4.6 FINDERS' AND BANKERS' FEES. There is no investment banker,
broker, finder or other intermediary which has been retained by or is
authorized to act on behalf of Buyer who might be entitled to any fee or
commission from the Company or any of the Company Subsidiaries if the
transactions contemplated by this Agreement are not consummated.
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ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1 CONDUCT OF THE COMPANY. From the date hereof until the Effective
Time, the Company and the Company Subsidiaries shall conduct their business in
the ordinary course consistent with past practice and (except for acts in
connection with the Merger) shall use their best efforts to preserve intact
their business organizations and relationships with third parties and to keep
available the services of their present officers and employees. Without
limiting the generality of the foregoing, from the date hereof until the
Effective Time, without the consent of Buyer:
(a) the Company will not adopt or propose any change in its articles of
incorporation or bylaws;
(b) the Company will not, and will not permit any Company Subsidiary to,
acquire, whether by purchase of equity securities, merger or consolidation,
any other Person or acquire a material amount of assets of any other Person
except (i) pursuant to existing contracts or commitments or (ii) in the
ordinary course consistent with the past practice;
(c) the Company will not, and will not permit any Company Subsidiary to,
sell, lease, license or otherwise dispose of any material assets or property
except (i) pursuant to existing contracts or commitments and (ii) in the
ordinary course consistent with past practice;
(d) except as otherwise contemplated herein, the Company will not, and will
not permit any Company Subsidiary to, agree or commit to do any of the
foregoing;
(e) the Company will not authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options or stock
appreciation rights), except as required by outstanding options or stock
appreciation rights under the Incentive Plan as in effect as of the date
hereof, or amend any of the terms of any such securities, options or rights
outstanding as of the date hereof, except as specifically contemplated by this
Agreement;
(f) the Company will not split, combine or reclassify shares of its capital
stock, declare, set aside or pay any dividend or other distribution (whether
in cash, stock or property or any combination thereof) in respect of its
capital stock (other than regular quarterly dividends of not more than $.01
per share on Company Common Stock declared and paid on dates consistent with
past practice), or redeem or otherwise acquire any of its securities or any
securities of the Company Subsidiaries; and
(g) the Company will not, and will not permit any Company Subsidiary to,
except as may be required by Law, enter into, adopt or amend or terminate any
bonus, profit sharing, compensation, severance, termination, stock option,
stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer of employee in any manner, or (except for normal increases
in the ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or compensation
expense to the Company, or as required under existing agreements) increase in
any manner the compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan and arrangement as in
effect as of the date hereof (including, without limitation, the granting of
stock appreciation rights or performance units).
SECTION 5.2 SHAREHOLDER MEETING; PROXY MATERIAL. The Company shall cause a
meeting of its shareholders (the "Company Shareholder Meeting") to be duly
called and held as soon as reasonably practicable for the purpose of voting on
the approval and adoption of this Agreement and the Merger. The directors of
the
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Company, acting in part on the unanimous recommendation of the Special
Committee, shall, subject to their fiduciary duties after consultation with
counsel, recommend approval and adoption of this Agreement and the Merger by
the Company's shareholders. In connection with such meeting, but subject to
the terms hereof, the Company (i) will promptly prepare and file with the SEC,
will use its best efforts to have cleared by the SEC and will thereafter mail
to its shareholders as promptly as practicable the Company Proxy Statement and
all other proxy materials for such meeting, and will prepare and file the
Schedule 13E-3 Transaction Statement required pursuant to Section 13(e) of the
Exchange Act (the "Schedule 13E-3"), (ii) will use its best efforts to obtain
the necessary approvals by its shareholders of this Agreement and the
transactions contemplated hereby and (iii) will otherwise comply with all
legal requirements applicable to such meeting.
SECTION 5.3 ACCESS TO INFORMATION. From the date hereof until the Effective
Time, the Company will give Buyer, its counsel, financial advisors, auditors
and other authorized representatives full access to the offices, properties,
books and records of the Company and the Company Subsidiaries, will furnish to
Buyer, its counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as
such Persons may reasonably request and will instruct the Company's employees,
counsel, financial advisors and auditors to cooperate with Buyer in its
investigation of the business of the Company and the Company Subsidiaries;
provided that no investigation pursuant to this Section shall affect any
representation or warranty given by the Company to Buyer hereunder.
SECTION 5.4 OTHER POTENTIAL BIDDERS. The Company shall, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, received prior to or after the date of this
Agreement, to the same extent permitted by Section 5.3 hereof, to any Person
pursuant to appropriate confidentiality agreements, and may participate in
discussions and negotiate with any such Person concerning any merger, sale of
assets, sale of shares of capital stock or similar transaction involving the
Company or any Company Subsidiary or division of the Company (any such
transaction being referred to herein as a "Competing Transaction"), if the
Special Committee determines that such action is necessary in light of its
fiduciary obligations to the Company's shareholders after consultation with
counsel. In addition, the Company shall direct its officers and other
appropriate personnel to cooperate with and be reasonably available to consult
with any such Person. Except as set forth above, the Company shall not
solicit, participate in or initiate discussions or negotiations with, or
provide any information to, any Person (other than Buyer) concerning any
merger, sale of assets, sale of shares of capital stock or similar transaction
involving the Company or any Company Subsidiary or division of the Company.
SECTION 5.5 NOTICES OF CERTAIN EVENTS. The Company shall promptly notify
Buyer of:
(i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; and
(ii) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement.
ARTICLE VI
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.1 VOTING OF SHARES. In any vote of the Company's shareholders with
respect to this Agreement and the transactions contemplated hereby, Agri
shall, and Gold Kist shall cause Agri to, vote or cause to be voted all of the
Shares then outstanding and beneficially owned by Agri in favor of the
approval and adoption of this Agreement and the transactions contemplated
hereby.
SECTION 6.2 DIRECTOR AND OFFICER LIABILITY. For six years from and after the
Effective Time, Buyer will or will cause the Surviving Corporation to
indemnify and hold harmless the present and former officers and directors of
the Company and the Company Subsidiaries in respect of acts or omissions
occurring at or prior to
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the Effective Time to the extent provided under the Company's articles of
incorporation and bylaws in effect on the date hereof; provided that such
indemnification shall be available to the extent permitted by applicable Law.
For such six years after the Effective Time, Buyer will or will cause the
Surviving Corporation to provide officers' and directors' liability insurance
in respect of acts or omissions occurring at or prior to the Effective Time
covering each such Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date
hereof, provided that if such coverage is not obtainable at a cost less than
or equal to three times the amount per annum the Company paid in its last full
fiscal year, Buyer shall or shall cause the Surviving Corporation to purchase
such lesser amount of coverage, on terms as similar in coverage as practicable
to such coverage in effect on the date hereof, as may be obtained having a per
annum cost not to exceed three times the amount per annum the Company paid in
its last full fiscal year, which amount has been disclosed to Buyer.
SECTION 6.3 NOTICES OF CERTAIN EVENTS. Buyer shall promptly notify the
Company of:
(i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; and
(ii) any notice or other communication from any Governmental Authority in
connection with the transactions contemplated by this Agreement.
SECTION 6.4 SPLIT DOLLAR LIFE INSURANCE. The parties acknowledge that,
pursuant to the Split Dollar Plan, each of the following directors of the
Company has entered into a Split Dollar Life Insurance Agreement with Gold
Kist (each a "Split Dollar Agreement"), and it is possible that such director
may not, in the discretion of Gold Kist and such director, continue as a
director of the Company after the Effective Time:
H.R. Holding
J.H. Levergood
J.W. McIntyre
W.W. Gaston
D.W. Sands
Gold Kist agrees that, at or before the Effective Time, it shall execute and
deliver to each director listed immediately above an amendment to such
director's Split Dollar Agreement providing that, consistent with Gold Kist's
discretion referenced in Section 6(a)(3) of each Split Dollar Agreement, Gold
Kist will continue such Split Dollar Agreement for the time period specified
in Item 4, Schedule A of such Split Dollar Agreement, regardless of whether
such director continues to be a director of the Company or any other Affiliate
of Gold Kist for such time period.
ARTICLE VII
COVENANTS OF BUYER AND THE COMPANY
The parties hereto agree that:
SECTION 7.1 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each party will use its best efforts to take, or cause to be taken,
all actions and to do, or cause to be done all things necessary, proper or
advisable under applicable Laws to consummate the transactions contemplated by
this Agreement.
SECTION 7.2 CERTAIN FILINGS. The Company and Buyer shall cooperate with one
another (a) in connection with the preparation of the Company Disclosure
Documents, (b) in determining whether any action by or in respect of, or
filing with, any Governmental Authority is required, or any actions, consents,
approvals or waivers are required to be obtained from parties to any material
contracts, in connection with the consummation of the transactions
contemplated by this Agreement, and (c) in seeking any such actions, consents,
approvals or waivers or making any such filings, furnishing information
required in connection therewith or with the Company Disclosure Documents and
seeking timely to obtain any such actions, consents, approvals or waivers.
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SECTION 7.3 PUBLIC ANNOUNCEMENTS. Buyer and the Company will consult with
each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable Law or any listing agreement with any
national securities exchange, will not issue any such press release or make
any such public statement prior to such consultation.
SECTION 7.4 FURTHER ASSURANCES. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company or Merger
Subsidiary, any deeds, bills of sale, assignments or assurances and to take
and do, in the name and on behalf of the Company or Merger Subsidiary, any
other actions and things they may deem desirable to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title
and interest in, to and under any of the rights, properties or assets of the
Company acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY. The obligations of
the Company, Buyer and Merger Subsidiary to consummate the Merger are subject
to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived, in whole or in part, by each of
the parties intended to benefit therefrom, to the extent permitted by
applicable Law:
(a) this Agreement and the Merger shall have been approved and adopted by
the Board of Directors of Gold Kist;
(b) this Agreement and the Merger shall have been approved and adopted by a
majority of all shares of the Company Common Stock entitled to vote thereon,
in accordance with Section 14-2-1103 of the GBCC, and by a majority of the
shares of the Company Common Stock entitled to vote thereon held by the Public
Shareholders, in accordance with the conflicting interest "safe harbor"
provided by Section 14-2-863 of the GBCC;
(c) no Governmental Authority shall have enacted, issued, promulgated,
enforced or entered any Law or Order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger;
(d) all actions by or in respect of or filings with any Governmental
Authority required to permit the consummation of the Merger shall have been
obtained, other than the filing of the requisite articles or certificate of
merger with the Secretary of State of Georgia; and
(e) at the time of mailing of the Company Proxy Statement, at the time of
the Company Shareholder Meeting and at the Effective Time, R-H shall have
reaffirmed in writing the fairness opinion previously prepared and delivered
by it to the Special Committee and R-H shall not have withdrawn such opinion;
and
(f) there shall be no action, suit, investigation or proceeding pending
against, or to the knowledge of the Company or Buyer, threatened against or
affecting, the Company, Buyer or any of their respective officers or
directors, which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay the Merger or any of the other transactions contemplated
hereby.
SECTION 8.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF BUYER AND MERGER
SUBISIDARY. The obligations of Buyer and Merger Subsidiary to consummate the
Merger are also subject to the satisfaction at or prior to the Effective Time
of the following further conditions, any or all of which may be waived, in
whole or in part, by each of the parties intended to benefit therefrom, to the
extent permitted by applicable Law:
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(a) the Company shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Effective Time, the representations and warranties of the Company contained in
this Agreement and in any certificate delivered by the Company pursuant hereto
shall be true and correct in all respects, except where the breach or
inaccuracy thereof would not, individually or in the aggregate, have a
Material Adverse Effect, at and as of the Effective Time as if made at and as
of such time, except that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date, and Buyer shall have received a certificate signed by the principal
financial officer of the Company to the foregoing effect;
(b) no Material Adverse Effect shall have occurred;
(c) Buyer shall have received or be satisfied that it will receive all
consents and approvals contemplated by Section 3.3 and any other consents of
third parties necessary in connection with the consummation of the Merger if
the failure to obtain any such consent would have a Material Adverse Effect;
(d) Buyer shall have received all documents it may reasonably request
relating to the existence of the Company and the authority of the Company to
enter into this Agreement, all in form and substance reasonably satisfactory
to Buyer; and
(e) at the time of mailing of the Company Proxy Statement, at the time of
the Company Shareholder Meeting and at the Effective Time, SunTrust Capital
Markets, Inc., financial adviser to Buyer, shall have reaffirmed in writing
the fairness opinion previously prepared and delivered by it to the Board of
Directors of Buyer and SunTrust Capital Markets, Inc. shall not have withdrawn
such opinion.
SECTION 8.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY. The
obligations of the Company to consummate the Merger are also subject to the
satisfaction at or prior to the Effective Time of the following further
conditions, any or all of which may be waived, in whole or in part, by the
Company to the extent permitted by applicable Law:
(a) Buyer and Merger Subsidiary shall have performed in all material
respects all of their respective obligations hereunder required to be
performed by them at or prior to the Effective Time, the representations and
warranties of Buyer contained in this Agreement and in any certificate
delivered by Buyer or Merger Subsidiary pursuant hereto shall be true and
correct in all material respects at and as of the Effective Time as if made at
and as of such time, except that those representations and warranties which
address matters only as of a particular date shall remain true and correct as
of such date, and the Company shall have received a certificate signed by the
President or any Vice President of each of Buyer and Merger Subsidiary to the
foregoing effect;
(b) the Company shall have received all documents it may reasonably request
relating to the existence of Buyer or Merger Subsidiary and the authority of
Buyer or Merger Subsidiary to enter into this Agreement, all in form and
substance reasonably satisfactory to the Company; and
(c) this Agreement and the Merger shall have been approved and adopted by
the Board of Directors of each of Agri and Merger Subsidiary.
ARTICLE IX
TERMINATION
SECTION 9.1 TERMINATION. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of this Agreement by the shareholders of the Company):
(a) by mutual written consent of the Company and Buyer;
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(b) by either the Company or Buyer, if the Merger has not been consummated
by September 30, 1997;
(c) by either the Company or Buyer, if there shall be any Law that makes
consummation of the Merger illegal or otherwise prohibited or if any Order
enjoining Buyer or the Company from consummating the Merger is entered and
such Order shall become final and nonappealable;
(d) by either the Company or Buyer if this Agreement and the Merger shall
fail to be approved and adopted by the shareholders of the Company at the
Company Shareholder Meeting called for such purpose, as set forth in Section
8.1(b) above;
(e) by Buyer or the Company (such determination to be made on behalf of the
Company by the Special Committee in its sole discretion), if, consistent with
the terms of this Agreement, the Board of Directors of the Company or the
Special Committee withdraws, modifies or changes its recommendation of this
Agreement or the Merger in a manner adverse to Buyer or Merger Subsidiary or
shall have resolved to do any of the foregoing or the Board of Directors of
the Company or the Special Committee shall have recommended to the
shareholders of the Company any Competing Transaction or resolved to do so.
SECTION 9.2 EFFECT OF TERMINATION. If this Agreement is terminated pursuant
to Section 9.1, this Agreement shall become void and of no effect with no
liability on the part of any party hereto, except that the agreements
contained in Section 10.5 shall survive the termination hereof; provided,
however, that, except as specifically provided herein, nothing herein shall
relieve any party hereto of liability for any breach of this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 DEFINITIONS. As used herein, the following terms have the
following respective meanings (such meanings to be equally applicable to both
the singular and plural forms of the terms defined):
"AFFILIATE" means, with respect to a Person, any other Person that, directly
or indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, such given Person.
"AGREEMENT" means this Agreement and Plan of Merger, as the same may be
supplemented, modified or amended from time to time.
"COMPANY SUBSIDIARIES" means GP Finance Corporation, a Delaware corporation,
and Carolina Golden Products Company, a Georgia general partnership.
"EXPENSES" means all reasonable out-of-pocket expenses (including, without
limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants (which shall not include fees and expenses of officers
or directors of Buyer and/or Affiliates thereof) and commitment fees and other
financing fees and expenses) incurred by Buyer, Merger Subsidiary or the
Company or on behalf of any such party in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement, the preparation, printing, filing and mailing of the Company Proxy
Statement and Schedule 13E-3, the solicitation of the shareholder approvals
and all other matters related to the consummation of the transactions
contemplated hereby.
"GAAP" means United States generally accepted accounting principles
consistently applied.
"GOVERNMENTAL AUTHORITY" means any federal, state, county, local, foreign or
other governmental or public agency, instrumentality, commission, authority,
board or body, and any court, arbitrator, mediator or tribunal.
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"LAW" means any code, law, ordinance, regulation, rule or statute of any
Governmental Authority.
"LIEN" means any security interest, lien, mortgage, deed to secure debt,
deed of trust, pledge, charge, conditional sale or other title retention
agreement, or other encumbrance of any kind.
"MATERIAL ADVERSE EFFECT" means any matter that would reasonably be expected
to affect materially and adversely the business, condition (financial or
otherwise) or results of operations of the Company and the Company
Subsidiaries considered as a whole.
"ORDER" shall mean any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or other Governmental Authority.
"PERSON" means an individual, a corporation, a partnership, an association,
a trust, a limited liability company or any other entity or organization,
including a government or political subdivision or any agency or
instrumentality thereof.
"SPLIT DOLLAR PLAN" means the Gold Kist Inc. Split Dollar Life Insurance
Plan effective March 1, 1995, which permits Gold Kist, and the Company as a
permitted affiliate of Gold Kist, to assist certain directors and officers of
Gold Kist and its affiliates in providing death benefits for their
beneficiaries.
"SURVIVING CORPORATION" means the Company as the surviving corporation
resulting from the Merger.
The following terms are defined in the following Sections of this Agreement:
<TABLE>
<S> <C>
TERM SECTION
"Agri" Opening Paragraph
"Buyer" Opening Paragraph
"Company" Opening Paragraph
"Company Common Stock" Recital A
"Company Disclosure Documents" 3.9(a)
"Company Proxy Statement" 3.9(a)
"Company Securities" 3.5
"Company Shareholder Meeting" 5.2
"Company 10-K" 3.7(a)
"Company 10-Qs" 3.8
"Competing Transaction" 5.4
"Exchange Act" 3.3
"Exchange Agent" 1.4(a)
"Effective Time" 1.2(b)
"GBCC" Recital E
"GCMAS" Recital E
"Gold Kist" Opening Paragraph
"Incentive Plan" 1.6
"Merger" Recital E
"Merger Consideration" 1.3(a)
"Merger Subsidiary" Opening Paragraph
"Preferred Stock" Recital A
"Public Shareholders" REcital C
"R-H" 3.11
"Schedule 13E-3" 5.2
"SEC" 3.7(a)
"Share" 1.3(a)
"Special Committee" Recital C
"Split Dollar Agreement" 6.4
"Subsidiary Securiteis" 3.6
</TABLE>
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<PAGE>
SECTION 10.2 NOTICES. Unless otherwise specifically provided herein, any
notice, demand, request or other communication herein requested or permitted
to be given shall be in writing and may be personally served, sent by
overnight courier service, or sent by telecopy with a confirming copy sent by
United States first-class mail, each with any postage or delivery charge
prepaid. For the purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section) shall be
as follows:
If to the Company: Golden Poultry Company, Inc.
c/o John W. McIntyre
Suite 100
7 Piedmont Center
Atlanta, Georgia 30305
Telephone: 404-816-5206
Telecopy: 404-816-3537
With a copy (which shall Sutherland, Asbill & Brennan, L.L.P.
not constitute notice) to: 999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attn: Thomas C. Herman
Telephone: 404-853-8000
Telecopy: 404-853-8806
If to Buyer or Merger Gold Kist Inc.
Subsidiary: 244 Perimeter Center Parkway, N.E.
Atlanta, Georgia 30346
Attn: Jack L. Lawing
Telephone: 770-393-5314
Telecopy: 770-393-5421
With a copy (which shall Alston & Bird LLP
not constitute notice) to: 1201 West Peachtree Street
Atlanta, Georgia 30309
Attn: B. Harvey Hill, Jr.
Telephone: 404-881-7446
Telecopy: 404-881-7777
Any notice provided hereunder shall be deemed to have been given on the date
delivered in person, or on the next business day after deposit with an
overnight courier service, or on the date received by telecopy transmissions.
SECTION 10.3 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties contained herein and in any certificate
delivered pursuant hereto shall not survive the Effective Time or the
termination of this Agreement.
SECTION 10.4 AMENDMENTS; NO WAIVERS. (a) Any provision of this Agreement may
be amended or waived prior to the Effective Time if, and only if, such
amendment or waiver is in writing and signed by all parties hereto, or in the
case of a waiver, by the party against whom the waiver is to be effective;
provided that any such amendment and any such waiver by the Company shall have
been approved by the Board of Directors of the Company, acting on the
recommendation of the Special Committee; and provided, further, that after the
adoption of this Agreement by the shareholders of the Company, no such
amendment or waiver shall, without the further approval of such shareholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company or (ii) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company.
-17-
<PAGE>
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.5 FEES AND EXPENSES. Except as otherwise provided in this
Section, all Expenses incurred in connection with this Agreement shall be paid
by the party incurring such Expense, provided that, if the Merger is not
consummated, all printing expenses and filing fees associated with the
preparation and distribution of the Company Proxy Statement shall be divided
equally between Buyer and the Company.
SECTION 10.6 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto except that Buyer may transfer
or assign, in whole or from time to time in part, to one or more of its
Affiliates, its rights under this Agreement, but any such transfer or
assignment will not relieve Buyer of its obligations under this Agreement or
prejudice the rights of shareholders to receive the Merger Consideration for
Shares properly surrendered in accordance with Section 1.4. This Agreement
shall not be construed so as to confer any right or benefit upon any person
other than the parties to this Agreement, and their respective successors and
assigns.
SECTION 10.7 GOVERNING LAW. Regardless of the place or places where this
Agreement may be executed, delivered or consummated, this Agreement shall be
governed by and construed in accordance with the Laws of the State of Georgia,
without regard to any applicable conflicts of Laws.
SECTION 10.8 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
SECTION 10.9 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
SECTION 10.10 INTERPRETATIONS. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party, whether
under any rule of construction or otherwise. No party to this Agreement shall
be considered the draftsman. The parties acknowledge and agree that this
Agreement has been reviewed, negotiated and accepted by all parties and their
attorneys and shall be construed and interpreted according to the ordinary
meaning of the words used so as fairly to accomplish the purposes and
intentions of all parties hereto.
SECTION 10.11 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf as of the day and year first above written.
GOLDEN POULTRY COMPANY, INC.
Attest: By: /s/ John W. McIntyre
/s/ Jack L. Lawing -----------------------------------
Name: John W. McIntyre
- -------------------------------------
Secretary Title: Chairman, Negotiating
Committee of the Board of
Directors
GOLD KIST INC.
Attest:
/s/ Jack L. Lawing By: /s/ John Bekkers
- ------------------------------------- -----------------------------------
Name: John Bekkers
Secretary
Title: President/Chief Operating
Officer
AGRI INTERNATIONAL, INC.
Attest: By: /s/ John Bekkers
/s/ Jack L. Lawing -----------------------------------
Name: John Bekkers
- -------------------------------------
Secretary Title: President
GOLDEN POULTRY ACQUISITION CORP.
Attest: By: /s/ Kenneth N. Whitmire
/s/ Jack L. Lawing -----------------------------------
Name: Kenneth N. Whitmire
- -------------------------------------
Secretary Title: Director
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<PAGE>
EXHIBIT B
ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE
RELATING TO DISSENTING SHAREHOLDERS
TITLE 14, CHAPTER 2, ARTICLE 13
DISSENTERS' RIGHTS
PART 1
RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
14-2-1301. DEFINITIONS.
As used in this article, the term:
(1) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(2) "Corporate action" means the transaction or other action by the
corporation that creates dissenters' rights under Code Section 14-2-1302.
(3) "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(4) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through 14-2-
1327.
(5) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effectuation of the corporate action
to which the dissenter objects, excluding any appreciation or depreciation
in anticipation of the corporate action.
(6) "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
(7) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
14-2-1302. RIGHT TO DISSENT.
(a) A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
<PAGE>
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale
or exchange pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporate action
was obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or share
exchange or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf
he asserts dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he dissents and his
other shares were registered in the names of different shareholders.
-2-
<PAGE>
PART 2
PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenters' rights under Code Section 14-2-
1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in Code Section 14-2-
1322 no later than ten days after the corporate action was taken.
14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) Must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) Must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection
(a) of this Code section is not entitled to payment for his shares under this
article.
14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must:
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered;
and
(4) Be accompanied by a copy of this Article.
14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code Section
14-2-1322 must demand payment and deposit his certificates in accordance with
the terms of the notice.
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<PAGE>
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this article.
14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
canceled or modified by the taking of the proposed corporate action.
14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a
payment demand, the corporation shall by notice to each dissenter who complied
with Code Section 14-2-1323 offer to pay the amount the corporation estimates
to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within such 30 days, payment
for his or her shares shall be made within 60 days after the making of the
offer or the taking of the proposed corporate action, whichever is later.
14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertificated shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed acting, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
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<PAGE>
14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section 14-
2-1325 is less than the fair value of his shares or that the interest due
is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under subsection
(a) of this Code section within 30 days after the corporation offered payment
for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written
demand for the information; and
(2) The shareholder may at any time, subject to the limitations period of
Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his shares and the amount of interest due and demand payment
of his estimate of the fair value of his shares and interest due.
PART 3
JUDICIAL APPRAISAL OF SHARES
14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the 60 day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided
by law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
-5-
<PAGE>
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it.
Except as otherwise provided in this chapter, Chapter 11 of Title 9, known
as the "Georgia Civil Practice Act," applies to any proceeding with respect to
dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective
parties. The court shall assess the costs against the corporation, except that
the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Code Section 14-2-1327.
(b) The court may also assess the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given
by the corporation in compliance with the provisions of Code Section 14-2-1320
and Code Section 14-2-1322.
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<PAGE>
EXHIBIT C
[LETTERHEAD OF THE ROBINSON-HUMPHREY COMPANY, INC. APPEARS HERE]
April 22, 1997
Special Committee of the Board of Directors
Golden Poultry Co., Inc.
P.O. Box 2210
Atlanta, GA 30301
Gentlemen:
We understand that Golden Poultry Co., Inc. (the "Company") and Gold Kist
Inc. (the "Buyer") propose to enter into an Agreement and Plan of Merger dated
as of April 22, 1997 (the "Merger Agreement"). Pursuant to the Merger
Agreement, each share of Common Stock of the Company (the "Common Stock") that
is not presently held by the Buyer (the "Minority Shares"), will be converted
into the right to receive $14.25 per share in cash. We understand that
approximately 75% of the outstanding shares of Common Stock are owned by the
Buyer. We further understand that the Merger is conditioned upon, among other
things, the approval of the majority of the shares of Common Stock not already
held by the Buyer. The terms and conditions of the Merger are more fully set
forth in the Merger Agreement.
We have been requested by the Special Committee of the Board of Directors of
the Company to render our opinion with respect to the fairness, from a
financial point of view, of the consideration to be received in the Merger.
In arriving at the opinion set forth below, we have, among other things:
1. Reviewed certain publicly available information concerning the Company
which we believe to be relevant to our analysis;
2. Reviewed certain internal financial statements and other financial and
operating data concerning the Company prepared by the management of the
Company;
3. Analyzed certain financial assumptions prepared by the Company;
4. Conducted discussions with members of management of the Company
concerning its business, operations and prospects;
5. Reviewed the reported prices and trading activity for the Common Stock;
6. Reviewed the historical market prices and trading activity for the
Company's shares and compared them with those of certain publicly traded
companies which we deemed to be reasonably similar to the Company;
7. Compared the results of operations and present financial condition of
the Company with those of certain publicly traded companies which we
deemed to be reasonably similar to the Company;
8. Reviewed the financial terms, to the extent publicly available, of
certain comparable minority buy-out transactions;
9. Performed certain financial analyses with respect to the Company's
projected future operating performance, including a discounted cash flow
analysis;
10. Compared the consideration paid for capacity expansions and additions in
selected transactions within the poultry processing industry;
11. Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary.
<PAGE>
Special Committee of the Board of Directors
Golden Poultry Co., Inc.
April 22, 1997
Page 2
- --------------------------------
We have relied upon the accuracy and completeness of the financial and other
information used by us in arriving at our Opinion without independent
verification, and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make such information
inaccurate or misleading. With respect to the financial forecasts for the
years 1997 through 2001, we have assumed that the assumptions provided by
management have been reasonably prepared and reflect the best currently
available estimates and judgment of the Company's management. In arriving at
our Opinion, we have not conducted an extensive physical inspection of the
properties or facilities of the Company. We have not made or obtained any
evaluations or appraisals of the assets or liabilities of the Company. Our
Opinion is necessarily based upon market, economic and other conditions as
they exist and can only be evaluated as of the date of this letter.
In arriving at our opinion, we were not authorized to solicit, and did not
solicit, interest from any party with respect to the acquisition of the
Company, any of its assets or Minority Shares.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company in connection with this transaction and will receive
a fee for our services.
In the ordinary course of our business, we have traded in the equity
securities of the Company for the accounts of our customers.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that the consideration to be received by the holders of Minority
Shares of Common Stock pursuant to the Merger Agreement is fair from a
financial point of view to such holders.
This Opinion is for the use and benefit of the Special Committee of the
Board of Directors of the Company and may not be used for any other purpose
without our prior written consent. We hereby consent, however, to the
inclusion of this opinion as an exhibit to any proxy statement distributed in
connection with the Merger.
Very truly yours,
THE ROBINSON-HUMPHREY COMPANY, INC.
<PAGE>
EXHIBIT D
[LETTERHEAD OF SUNTRUST CAPITAL MARKETS, INC. APPEARS HERE]
April 25, 1997
Board of Directors
Gold Kist Inc.
244 Perimeter Center Parkway, NE
Atlanta, GA 30346
Gentlemen:
We understand that Gold Kist Inc. ("Gold Kist"), through Agri International,
Inc. ("Agri"), a wholly owned subsidiary, has entered into an Agreement and
Plan of Merger (the "Merger Agreement") with Golden Poultry Company, Inc.
("Golden Poultry") dated as of April 22, 1997, whereby a wholly owned
subsidiary of Agri, Golden Poultry Acquisition Corp., will merge into Golden
Poultry (the "Merger"). The Merger has been structured so as to enable Gold
Kist, through Agri, to acquire the outstanding equity interest in Golden
Poultry that it does not currently own. Pursuant to the Merger Agreement, each
outstanding share of common stock of Golden Poultry, except those shares held
by Golden Poultry as treasury shares, beneficially owned by Gold Kist, or
owned by shareholders who perfect their dissenter's rights, will be converted
into the right to receive $14.25 in cash, without interest.
You have provided us with the Proxy Statement which includes the Merger
Agreement for the Merger in substantially the form to be sent to Golden
Poultry's public stockholders (the "Proxy Statement").
We have been asked to render our opinion as to whether the Transaction is
fair, from a financial point of view, to the cooperative members of Gold Kist
Inc.
In the course of our analyses for rendering this opinion, we have:
1. reviewed the Proxy Statement;
2. reviewed Golden Poultry's Annual Reports to Shareholders and Annual
Reports on Form 10-K for the fiscal years ended December 31, 1991 through
1996, and its Quarterly Reports on Form 10-Q for the periods ended
September and December 1997;
3. reviewed certain operating and financial information including
projections, provided to us by Golden Poultry's senior management,
relating to its business prospects;
4. met with certain members of Golden Poultry's senior management to discuss
its operations, historical financial statements and future prospects;
5. reviewed the historical stock prices and trading volumes of the common
shares of Golden Poultry;
6. reviewed publicly available financial data and stock market performance
data of other public companies which we deemed generally comparable to
Golden Poultry;
7. reviewed the terms of recent acquisitions of companies which we deemed
generally comparable to Golden Poultry; and
8. conducted such other studies, analyses and inquiries and investigations
as we deemed appropriate.
<PAGE>
April 25, 1997
Page 2
In the course of our review, we have relied upon and assumed, without
independent verification, the accuracy and completeness of the financial and
other information provided to us by Golden Poultry management, and we have
further relied upon the assurances of management that they are unaware of any
facts that would make the information provided to us incomplete or misleading.
In arriving at our opinion, we have not performed any independent appraisal of
the assets of Golden Poultry.
Based on the foregoing it is our opinion that the Merger is fair, from a
financial point of view, to the cooperative members of Gold Kist.
Very truly yours,
SunTrust Capital Markets, Inc.
By: /s/ James D. Decker
---------------------
James D. Decker
Director
<PAGE>
EXHIBIT (d)(3)
PROXY CARD
REVOCABLE PROXY-SOLICITED BY THE BOARD OF DIRECTORS
GOLDEN POULTRY COMPANY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
A SPECIAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints G. O. Coan, J. Bekkers and K.N. Whitmire and
each of them, proxies, with full power of substitution, to vote for and in the
name of the undersigned at a Special Meeting of Shareholders (the "Special
Meeting") of Golden Poultry Company, Inc. (the "Company"), to be held at the
Company's corporate offices, 244 Perimeter Center Parkway, N.E. Atlanta, Georgia
on ______, July __, 1997 at 10:00 a.m., local time, and at any and all
adjournments thereof, as indicated on the reverse.
THIS PROXY CARD WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY CARD WILL BE VOTED IN THE DISCRETION OF THE PROXIES "FOR" THE
PROPOSAL.
If the undersigned elects to withdraw this proxy card at or before the time of
the Special Meeting or any adjournments thereof and notifies an authorized
representative of the Company at or prior to the Special Meeting of the decision
of the undersigned to withdraw this proxy card, then the power of said proxies
shall be deemed terminated and of no further force and effect. If the
undersigned withdraws this proxy card in the manner described above and prior to
the Special Meeting does not submit a duly executed and subsequently dated proxy
card to the Company, the undersigned may vote in person at the Special Meeting.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED PREPAID
ENVELOPE.
(CONTINUED, AND TO BE SIGNED AND DATED, ON THE REVERSE SIDE)
for against abstain THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE FOLLOWING PROPOSAL
[_] [_] [_]
Approval and adoption of the Agreement and Plan of
Merger (the "Merger Agreement") among the Company, Gold
Kist Inc. ("Gold Kist"), Agri International, Inc., a
wholly owned subsidiary of Gold Kist and the direct
owner of 75% of the Company's Common Stock ("Agri"), and
Golden Poultry Acquisition Corp., a wholly owned
subsidiary of Agri ("Merger Sub"), pursuant to which,
among other things, (a) Merger Sub will be merged into
the Company (the "Merger") with the Company being the
surviving corporation (the "Surviving Corporation") and
pursuant to which the separate existence of Merger Sub
will cease, (b) each outstanding share of the Company's
common stock, no par value (the "Common Stock"), except
Common Stock held by the Company as treasury stock or
beneficially owned by Gold Kist or by persons who
perfect their dissenters' rights under Georgia law, will
be converted into the right to receive $14.25 in cash,
without interest, (c) each outstanding share of Common
Stock beneficially owned by Gold Kist or held by the
Company as treasury stock will be canceled without
consideration, and (d) each outstanding share of Merger
Sub common stock will be converted into one share of
common stock of the Surviving Corporation.
Signature Signature Date
------------------- --------------------- ------------
Please sign exactly as your name appears above. If a corporation, please sign by
the president or other authorized officer and include title. If a partnership,
please sign by an authorized person and include title.
Please mark, sign, date and mail this proxy card promptly, using the enclosed
envelope.
<PAGE>
EXHIBIT (d)(4)
FOR IMMEDIATE RELEASE:
GOLD KIST AND GOLDEN POULTRY
BEGIN MERGER DISCUSSIONS
Atlanta, GA, January 23, 1997--Gold Kist Inc. began discussions with a
committee of independent directors appointed today by the board of Golden
Poultry Company, Inc., (NASDAQ:CHIK) about a possible merger of Golden
Poultry with a subsidiary of Gold Kist.
Gold Kist currently owns approximately 10,900,000, or 75%, of Golden
Poultry's total of 14,624,000 shares of common stock outstanding.
On January 13, 1997 the Gold Kist board authorized management to enter
negotiations with Golden Poultry that could result in the acquisition,
through a subsidiary, of the Golden Poultry shares it did not currently
own, according to Gaylord O. Coan, Gold Kist chief executive officer and
chairman of its management committee. Results of the negotiations with the
Golden Poultry committee must be submitted to the Gold Kist Board for its
final decision about completing the transaction, Coan said. The Gold Kist
board indicated that, if the acquisition is completed, the former Golden
Poultry facilities would become cooperative operations.
Golden Poultry operates divisions in Georgia, Alabama and North Carolina.
Fiscal 1996 sales were $600.2 million, including sales of Carolina Golden
Products Company at Sumter, SC. Golden Poultry owns 51% of Carolina Golden
in a joint venture partnership with Gold Kist.
Gold Kist is a diversified agricultural cooperative, based in Atlanta, GA,
which serves approximately 30,000 members. Fiscal 1996 sales were
approximately $2.0 billion. Gold Kist supplies farmers and agricultural
products dealers in the Southeast, Midsouth and Southwest and purchases
grain and other agricultural products for its own use and for sale to
further processors. Its poultry operations are located in Georgia, Alabama
and Florida.
<PAGE>
EXHIBIT (d)(5)
FOR IMMEDIATE RELEASE:
GOLDEN POULTRY NEGOTIATING COMMITTEE ACCEPTS
$14.25 PER SHARE OFFER FROM GOLD KIST
Atlanta, GA, April 11, 1997--Gold Kist Inc. and Golden Poultry Company,
Inc. (NASDAQ:CHIK) today announced an agreement in principle that could
result in the purchase by Gold Kist of the Golden Poultry shares it does
not presently own.
A negotiating committee of independent directors of the board of Golden
Poultry and Gold Kist agreed on a price of $14.25 per share. Gold Kist
owns approximately 10,900,000, or 75 per cent, of Golden Poultry's
14,624,000 shares of common stock outstanding, according to Gaylord O.
Coan, Gold Kist chief executive officer and chairman of its management
committee.
Negotiations began in January 1997. The purchase is subject to
approval of a definitive agreement by the boards of directors of both
companies and by a majority of the owners of the Golden Poultry shares not
owned by Gold Kist. The acquisition will be accomplished in the form of a
merger with a Gold Kist subsidiary formed for this purpose and should be
completed in July 1997, Coan said.
Golden Poultry operates divisions in Georgia, Alabama and North
Carolina. Fiscal 1996 sales were $600 million, including sales of Carolina
Golden Products Company at Sumter, SC. Golden Poultry owns 51% of Carolina
Golden in a joint venture partnership with Gold Kist.
Gold Kist is a diversified agricultural cooperative, based in Atlanta,
GA, which serves approximately 30,000 members. Fiscal 1996 sales were
approximately $2 billion. Poultry operations in Georgia, Alabama and
Florida make it the second largest poultry processor in the United States.
It also operates 100 farm supply stores in the Southeast, Midsouth and
Southwest and is engaged in grain purchasing, plant breeding and seed
production, wholesale fertilizer and crop protection chemical sales, pet
food and animal products manufacturing and sales and other agricultural-
related businesses.
