Oct 7 (Reuters) - Shares of Tyson Foods Inc, the largest U.S. meat processor, fell as much as 11.5 percent to $65.85 on Friday after a brokerage report said a class action lawsuit against the company alleging collusion might have merit.
Tyson Foods disputed the allegations in the complaints as well as the speculative conclusions in the report.
The lawsuit filed last month alleged that Tyson colluded with Koch Foods and others in the broiler chicken business to reduce production since 2008.
Pivotal Research Group analyst Timothy Ramey said he was not alleging that Tyson colludes on chicken pricing or production.
However, the brokerage downgraded the company’s stock to “sell” from “buy” and cut its price target to $40 from $100, saying the lawsuit would lead to intense scrutiny of the sector.
Pivotal Research is the only brokerage with a “sell” rating among the 11 brokerages covering the company. At least six brokerages rate the stock “buy” or higher and four “hold”.
“Our thesis is that the class-action suit has merit and will lead to intense scrutiny of the broiler sector,” Ramey wrote.
“We have long wondered how an industry marked by such volatility and lack of discipline could morph to a highly disciplined industry where production remains constrained and pricing remains high,” Ramey added.
Tyson Foods said it had not made any changes to its business practices in response to the complaint. (Reporting by Gayathree Ganesan in Bengaluru)