(Adds details, share moves of other chicken producers)
Oct 7 Shares of Tyson Foods Inc fell
11.5 percent, their biggest intraday percentage drop in more
than six years, after a brokerage said a class action lawsuit
against the largest U.S. meat processor over industry collusion
was "powerfully convincing".
The lawsuit filed last month alleged that Tyson colluded
with Koch Foods and others in the broiler chicken business to
reduce production since 2008.
Tyson Foods disputed the allegations in the complaints as
well as the speculative conclusions in the report.
Shares of other chicken producers named in the lawsuit,
Pilgrim's Pride Corp and Sanderson Farms Inc,
were also down about 4 percent in afternoon trading on Friday.
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.
Tyson's shares were down 9 percent at $67.71 in afternoon
The company's annual profit has grown from $86 million in
2008 to $1.22 billion last year, partly helped by its
acquisition of Jimmy Dean sausage maker Hillshire Brands in
2014. The chicken business, Tyson's second-largest by sales,
accounted for 63 percent of the company's operating income last
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 and Sruthi Ramakrishnan in
Bengaluru; Editing by Shounak Dasgupta)