Oct 7 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)