UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

 

Filed by the Registrant  ☒                             Filed by a party other than the Registrant  ☐

Check the appropriate box:

 

☒		Preliminary Proxy Statement
☐		Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☐		Definitive Proxy Statement
☐		Definitive Additional Materials
☐		Soliciting Material under §240.14a-12

SANDERSON FARMS, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

☐		No fee required.
☒		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
		(1)		Title of each class of securities to which transaction applies:
				Common Stock, par value $1.00 per share, of Sanderson Farms, Inc. (“Sanderson Farms common stock”)
		(2)		Aggregate number of securities to which transaction applies:   22,608,694 shares of Sanderson Farms Common Stock, which consists of (a) 22,026,471 shares of Sanderson Farms common stock outstanding as of August 30, 2021, (b) 582,223 shares of Sanderson Farms common stock collectively underlying (i) Sanderson Farms restricted common stock outstanding as of August 30, 2021 (the “restricted share awards”) and (ii) Sanderson Farms performance share awards (assuming maximum performance) that are outstanding as of August 30, 2021 (the “performance share awards”)
		(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):   The maximum aggregate value was determined based upon the sum of: (a) 22,026,471 shares of Sanderson Farms common stock multiplied by $203.00 per share, and (b) 582,223 shares of Sanderson Farms common stock underlying outstanding (i) restricted share awards and (ii) performance share awards, multiplied by $203.00 per share
		(4)		Proposed maximum aggregate value of transaction:   $4,589,564,882.00
		(5)		Total fee paid:   $500,721.53   In accordance with Section 14(g) of the Securities Exchange Act of 1934, as amended, the filed fee was determined by multiplying $4,589,564,882.00 by 0.0001091.
☐		Fee paid previously with preliminary materials.
☐		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
		(1)		Amount Previously Paid:
		(2)		Form, Schedule or Registration Statement No.:
		(3)		Filing Party:
		(4)		Date Filed:

 

 

 

PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 2021

 

Sanderson Farms, Inc.

127 Flynt Road

Laurel, Mississippi 39443

Dear Sanderson Farms Stockholder:

You are cordially invited to attend a special meeting (including any adjournments or postponements thereof, the “Special Meeting”) of stockholders of Sanderson Farms, Inc. (“Sanderson Farms” or the “Company”) to be held on [    ], 2021, at [    ], Central time. Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and stockholders, Sanderson Farms will hold the Special Meeting virtually via the Internet at https://meetnow.global/MP5NPZA. You will not be able to attend the Special Meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting. Formal notice of the Special Meeting, a proxy statement and a proxy card accompany this letter.

At the Special Meeting, you will be asked to consider and vote on (i) a proposal to approve the Agreement and Plan of Merger, dated as of August 8, 2021 (the “Merger Agreement”), by and among Sanderson Farms, Inc., a Mississippi business corporation (“Sanderson Farms”), Walnut Sycamore Holdings LLC, a Delaware limited liability company (“Parent”), Sycamore Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Parent (“Merger Sub”), Sanderson Farms, and solely for purposes of certain provisions specified therein, Wayne Farms LLC, a Delaware limited liability company (“Wayne Farms”), (ii) a proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Sanderson Farms’ named executive officers that is based on or otherwise related to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”), and (iii) a proposal to adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting. Parent and Merger Sub are entities that are affiliated with Cargill, Incorporated, a Delaware corporation (“Cargill”), and Continental Grain Company, a Delaware corporation (“CGC”). Wayne Farms is an entity that is affiliated with CGC. Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into the Company and the separate corporate existence of Merger Sub will cease, with the Company continuing as the surviving corporation (the “Merger”) and an indirect wholly owned subsidiary of Parent.

If the Merger is completed, you will be entitled to receive $203.00 in cash, without interest, for each share of Sanderson Farms common stock that you own.

The Board of Directors of Sanderson Farms (the “Board of Directors”), after considering the factors more fully described in the enclosed proxy statement, has unanimously: (i) determined that it is fair to and in the best interests of Sanderson Farms and its stockholders, and declared it advisable, to enter into the Merger Agreement; (ii) adopted the plan of merger set forth in the Merger Agreement, (iii) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated by the Merger Agreement, including the Merger; and (iv) resolved to recommend that holders of Sanderson Farms common stock approve the Merger Agreement in accordance with the Delaware Limited Liability Company Act, as amended (the “DLLCA”) and Mississippi Business Corporation Act (the “MBCA”). The Board of Directors

unanimously recommends that you vote: (1) “FOR” the approval of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement.

The proxy statement also describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire enclosed proxy statement and its annexes, including, but not limited to, the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person by virtual ballot, your vote will revoke any proxy that you have previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to approve the Merger Agreement, without your instructions.

Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the proposal to approve the Merger Agreement is approved by the affirmative vote of the holders of at least two-thirds of the total outstanding shares of Sanderson Farms common stock entitled to vote at the Special Meeting.

If you have any questions or need assistance voting your shares, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

proxy@mackenziepartners.com

(212) 929-5500 or (800) 322-2885

On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of these matters.

Sincerely,

 

                                                 

Joe F. Sanderson, Jr.

Chairman and Chief Executive Officer

The accompanying proxy statement is dated [    ], 2021 and, together with the enclosed form of proxy card, is first being mailed on or about [    ], 2021.

 

PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED SEPTEMBER 3, 2021

 

Sanderson Farms, Inc.

127 Flynt Road

Laurel, Mississippi 39443

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD VIRTUALLY VIA THE INTERNET ON [    ], 2021

Notice is hereby given that a special meeting of stockholders (including any adjournments or postponements thereof, the “Special Meeting”) of Sanderson Farms, Inc., a Mississippi business corporation (“Sanderson Farms”), will be held on [    ], 2021 at [    ], Central time. Due to public health concerns regarding the coronavirus, or COVID-19, pandemic and to prioritize the health and wellbeing of our employees, shareholders and other community members, Sanderson Farms will hold the Special Meeting virtually via the Internet only on https://meetnow.global/MP5NPZA. You will not be able to attend the special meeting physically in person. For purposes of attendance at the Special Meeting, all references in this proxy statement to “present in person” or “in person” shall mean virtually present at the Special Meeting. The Special Meeting is being held for the following purposes:

1. To consider and vote on the proposal to approve the Agreement and Plan of Merger, dated as of August 8, 2021, (the “Merger Agreement”), by and among Sanderson Farms, Walnut Sycamore Holdings LLC, a Delaware limited liability company (“Parent”), Sycamore Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of Parent (“Merger Sub”), and solely for purposes of certain provisions specified therein, Wayne Farms LLC, a Delaware limited liability company (“Wayne Farms”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into Sanderson Farms and the separate corporate existence of Merger Sub will cease, with Sanderson Farms continuing as the surviving corporation (the “Merger”) and an indirect wholly owned subsidiary of Parent;

2. To consider and vote on the proposal to approve, on an advisory (non-binding) basis, the compensation that may be paid or become payable to Sanderson Farms’ named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (the “Compensation Proposal”); and

3. To consider and vote on any proposal to adjourn the Special Meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

Only Sanderson Farms stockholders of record as of the close of business on [    ], 2021, are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.

The Board of Directors unanimously recommends that you vote: (1) “FOR” the approval of the Merger Agreement; (2) “FOR”, on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

Sanderson Farms has concluded that its stockholders are not entitled to assert appraisal rights under the Mississippi Business Corporation Act in connection with the Merger.

Whether or not you plan to attend the Special Meeting in person, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and vote in person by virtual ballot, your vote will revoke any proxy that you have previously submitted.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the proposal to approve the Merger Agreement, without your instructions.

If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote “FOR” the approval of the Merger Agreement, “FOR”, on an advisory (non-binding) basis, the Compensation Proposal and “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

 

Dated: [    ], 2021

YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) THROUGH THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote at any time before it is voted at the Special Meeting.

If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to approve the Merger Agreement, without your instructions.

If you are a Sanderson Farms stockholder of record, voting in person by virtual ballot at the Special Meeting will revoke any proxy that you previously submitted. If you hold your shares through a bank, broker or other nominee, you must obtain a “legal proxy” in order to vote in person at the Special Meeting.

If you fail to (1) return your proxy card, (2) grant your proxy electronically over the Internet or by telephone or (3) vote by virtual ballot in person at the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the proposal to approve the Merger Agreement but will have no effect on the Compensation Proposal or the adjournment proposal.

You should carefully read and consider the entire accompanying proxy statement and its annexes, including, but not limited to, the Merger Agreement, along with all of the documents incorporated by reference into the accompanying proxy statement, as they contain important information about, among other things, the Merger and how it affects you. If you have any questions concerning the Merger Agreement, the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of Sanderson Farms common stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

proxy@mackenziepartners.com

(212) 929-5500 or (800) 322-2885

 

TABLE OF CONTENTS

 

SUMMARY			1
Parties Involved in the Merger			1
The Merger			3
Merger Consideration			3
Material U.S. Federal Income Tax Consequences of the Merger			4
No Appraisal Rights			5
Regulatory Approvals Required for the Merger			5
Closing Conditions			5
Financing of the Merger			6
Required Stockholder Approval			6
The Special Meeting			7
Recommendation of the Board of Directors			7
Opinion of Centerview Partners LLC			8
Interests of Sanderson Farms’ Directors and Executive Officers in the Merger			9
Alternative Acquisition Proposals			9
Termination of the Merger Agreement			10
Effect on Sanderson Farms if the Merger Is Not Completed			10
QUESTIONS AND ANSWERS			11
FORWARD-LOOKING STATEMENTS			18
THE SPECIAL MEETING			20
Date, Time and Place			20
Purpose of the Special Meeting			20
Record Date; Shares Entitled to Vote; Quorum			20
Vote Required; Abstentions and Broker Non-Votes			20
Stock Ownership and Interests of Certain Persons			21
Voting of Proxies			21
Revocability of Proxies			22
Board of Directors’ Recommendation			22
Solicitation of Proxies			23
Anticipated Date of Completion of the Merger			23
No Appraisal Rights			23
Delisting and Deregistration of Sanderson Farms Common Stock			23
Other Matters			23
Householding of Special Meeting Materials			23
Questions and Additional Information			24
THE MERGER			25
Parties Involved in the Merger			25
Effect of the Merger			27
Effect on Sanderson Farms if the Merger Is Not Completed			27
Background of the Merger			28
Reasons for the Merger; Recommendation of the Board of Directors			34
Opinion of Centerview Partners LLC			38
Management Projections			45
Interests of Sanderson Farms’ Directors and Executive Officers in the Merger			47
Financing of the Merger			52
Closing and Effective Time			54
No Appraisal Rights			54
Accounting Treatment			55

Material U.S. Federal Income Tax Consequences of the Merger			55
Regulatory Approvals Required for the Merger			59
PROPOSAL 1: APPROVAL OF THE MERGER AGREEMENT			60
Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers			60
When the Merger Becomes Effective			60
Effect of the Merger on the Sanderson Farms Common Stock			61
Withholding Rights			61
Treatment of Company Equity Awards			61
Payment for Common Stock in the Merger			62
Representations and Warranties			62
Conduct of Business Pending the Merger			65
Access			67
Alternative Proposals; No Solicitation			67
The Board of Directors’ Recommendation; Change of Recommendation; Superior Proposal Termination Right			70
Company Meeting			72
Financing Cooperation			72
Employee Matters			75
Efforts to Complete the Merger			76
Indemnification and Insurance			76
Coordination on Stockholder Litigation			77
Other Covenants and Agreements			78
Conditions to the Closing of the Merger			78
Termination			79
Company Termination Fee			80
Parent Termination Fee			81
Limitation on Remedies			82
Amendment and Modification			83
Specific Enforcement			83
Governing Law			84
Vote Required and Board of Directors Recommendation			86
PROPOSAL 2: THE SANDERSON FARMS COMPENSATION PROPOSAL			85
Vote Required and Board of Directors Recommendation			85
PROPOSAL 3: ADJOURNMENT OF THE SPECIAL MEETING			86
Vote Required and Board of Directors Recommendation			86
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			87
Delinquent Section 16(a) Reports			88
FUTURE STOCKHOLDER PROPOSALS			89
WHERE YOU CAN FIND MORE INFORMATION			90
MISCELLANEOUS			92
ANNEX A — AGREEMENT AND PLAN OF MERGER			A-1
ANNEX B — OPINION OF CENTERVIEW PARTNERS LLC			B-1

 

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QUESTIONS AND ANSWERS

The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the caption, “Where You Can Find More Information.”

Q:    Why am I receiving these materials?

A:    The Board of Directors is furnishing this proxy statement and form of proxy card to the holders of shares of Sanderson Farms common stock in connection with the solicitation of proxies to be voted at the Special Meeting.

Q:    When and where is the Special Meeting?

A:    Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and stockholders, Sanderson Farms will hold the Special Meeting virtually via the Internet at the virtual meeting website. You will not be able to attend the Special Meeting physically in person.

Q:    What am I being asked to vote on at the Special Meeting?

A:    You are being asked to vote on the following proposals:

 

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to approve the Merger Agreement pursuant to which Merger Sub will merge with and into Sanderson Farms, and Sanderson Farms will become an indirect wholly owned subsidiary of Parent;

 

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to approve, on an advisory (non-binding) basis, the Compensation Proposal; and

 

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to approve the adjournment of the Special Meeting to a later date or dates, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

Q:    Who is entitled to vote at the Special Meeting?

A:    Stockholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of Sanderson Farms common stock shall be entitled to cast one (1) vote on each matter properly brought before the Special Meeting for each such share owned at the close of business on the Record Date.

Q:    May I attend the Special Meeting and vote in person?

A:    Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and stockholders, Sanderson Farms will hold the Special Meeting virtually via the Internet at the virtual meeting website. You will not be able to attend the Special Meeting physically in person.

If you are a stockholder of record, you may attend the Special Meeting virtually via the Internet at the virtual meeting website on [    ], 2021 and complete a virtual ballot, whether or not you sign and return your proxy card.

If you are a stockholder of record, you will need your assigned 15-digit control number to vote shares electronically at the Special Meeting. The control number can be found on the proxy card, voting instruction form, or other applicable proxy notices.

 

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Even if you plan to attend the Special Meeting in person, to ensure that your shares will be represented at the Special Meeting, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). If you attend the Special Meeting and complete a virtual ballot, your vote will revoke any proxy previously submitted.

If you hold your shares of Sanderson Farms common stock in “street name” through a bank, broker or other nominee (a “Beneficial Owner”), you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your broker or other agent cannot vote on any of the proposals, including the proposal to approve the Merger Agreement, without your instructions. If you are a Beneficial Owner, you may not vote your shares in person at the Special Meeting unless you obtain a “legal proxy” from your bank, broker or other nominee by submitting proof of your “legal proxy” reflecting your holdings in Sanderson Farms along with your name and email address to Computershare. Requests for registration must be labeled as “Legal Proxy” and be received no later than [    ], Central time on [    ], 2021. You will receive confirmation of your registration by email after we receive your registration materials. Request for registration should be directed to us at the following:

 

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By email: Forward the email from your broker, or attach an image of your legal proxy, to legalproxy@computershare.com

 

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By mail:

Computershare

Sanderson Farms, Inc. Legal Proxy

P.O. Box 43001

Providence, RI 02940-3001

The Special Meeting will be held on [    ], 2021 at [    ], Central time. We encourage you to access the Special Meeting prior to the start time leaving ample time for check in.

Q:    Why did we choose to hold a virtual Special Meeting?

A:    The Board of Directors decided to hold the Special Meeting virtually in response to public health concerns over large gatherings of people in order to help limit potential transmission of COVID-19. Furthermore, our experience with virtual meetings demonstrated that the goals of accessibility and the stockholder participation can be well served by the virtual format.

Q:    What will I receive if the Merger is completed?

A:    Upon completion of the Merger, you will be entitled to receive the Merger Consideration of $203.00 in cash, without interest, for each share of Sanderson Farms common stock that you own. For example, if you own 100 shares of Sanderson Farms common stock, you will receive $20,300.00 in cash in exchange for your shares of Sanderson Farms common stock, without interest.

Q:    What vote is required to approve the Merger Agreement?

A:    The affirmative vote of the holders of two-thirds of the outstanding shares of Sanderson Farms common stock is required to approve the Merger Agreement.

If a quorum is present at the Special Meeting, the failure of any stockholder of record to: (i) submit a signed proxy card; (ii) grant a proxy over the Internet or by telephone (using the instructions provided in the enclosed proxy card); or (iii) vote in person by virtual ballot at the Special Meeting will have the same effect as a vote “AGAINST” the proposal to approve the Merger Agreement.

 

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If a quorum is present at the Special Meeting, the failure of any Beneficial Owner to instruct its bank, broker or other nominee how to vote its shares will have the same effect as a vote “AGAINST” the proposal to approve the Merger Agreement.

If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the proposal to approve the Merger Agreement. Each “broker non-vote” will also count as a vote “AGAINST” the proposal to approve the Merger Agreement.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR” the approval of the Merger Agreement.

Q:    What happens if the Merger is not completed?

A:    If the Merger Agreement is not adopted by Sanderson Farms Stockholders or if the Merger is not completed for any other reason, Sanderson Farms Stockholders will not receive any payment for their shares of Sanderson Farms common stock. Instead, Sanderson Farms will remain an independent public company, Sanderson Farms common stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act, and we will continue to file periodic reports with the SEC.

Under certain circumstances, Sanderson Farms will be required to pay Parent a termination fee equal to $158 million if (i) Sanderson Farms has terminated the Merger Agreement to enter into a definitive agreement providing a Superior Proposal, in accordance with the terms of the Merger Agreement; (ii) Parent has terminated the Merger Agreement because of a Change of Recommendation; or (iii) in connection with an Alternative Proposal (subject to certain other conditions). Please see the section of this proxy statement entitled “Proposal 1: Approval of the Merger Agreement—Company Termination Fee.”

Under certain circumstances, Parent will be required to pay a termination fee of $300 million should Parent either breach the Merger Agreement or fail to pay the equity financing following the Company Stockholder Approval at the closing of the Merger (subject to certain other conditions) and, in each case, certain closing conditions of the Investment Agreement were not satisfied or waived, including the absence of a Wayne Farms Material Adverse Effect.

Under certain circumstances, Parent will be required to pay a termination fee of $250 million if (i) Parent fails to secure the debt financing at the closing of the Merger (other than as a result of the inability of the closing to occur under the Investment Agreement due to the failure of certain conditions to the obligations of CMSC set forth in the Investment Agreement to have been satisfied or waived) following the Company Stockholder Approval at the closing of the Merger (subject to certain other conditions) or (ii) the Antitrust Closing Condition is not satisfied (subject to certain other conditions). Please see the section of this proxy statement entitled “Proposal 1: Approval of the Merger Agreement—Parent Termination Fee.”

Q:    Why are the stockholders being asked to cast an advisory (non-binding) vote to approve the Compensation Proposal?

A:    The Exchange Act and applicable SEC rules thereunder require Sanderson Farms to seek an advisory (non-binding) vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger.

Q:    What vote is required to approve the Compensation Proposal?

A:    Approval of the Compensation Proposal requires, if a quorum is present, the affirmative vote of the shares of Sanderson Farms common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter to exceed the votes cast of the shares of Sanderson Farms common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter opposing such proposal.

 

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If a quorum is present at the Special Meeting, the failure of any stockholder of record to: (i) submit a signed proxy card; (ii) grant a proxy over the Internet or by telephone (using the instructions provided in the enclosed proxy card); or (iii) vote in person by virtual ballot at the Special Meeting will have no effect on the Compensation Proposal.

If a quorum is present at the Special Meeting, the failure of any Beneficial Holder to instruct its bank,

broker or other nominee how to vote its shares will have no effect on the Compensation Proposal.

If a quorum is present at the Special Meeting, abstentions and “broker non-votes” will have no effect on the Compensation Proposal.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR,” on an advisory (non-binding) basis, the Compensation Proposal.

Q:    What vote is required to approve the Adjournment Proposal?

A:    Approval of the Adjournment Proposal requires, if a quorum is present, the affirmative vote of the shares of Sanderson Farms common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter to exceed the votes cast of the shares of Sanderson Farms common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter opposing such proposal.

If a quorum is present at the Special Meeting, the failure of any stockholder of record to: (i) submit a signed proxy card; (ii) grant a proxy over the Internet or by telephone (using the instructions provided in the enclosed proxy card); or (iii) vote in person by virtual ballot at the Special Meeting will have no effect on the Adjournment Proposal.

If a quorum is present at the Special Meeting, the failure of any Beneficial Holder to instruct its bank,

broker or other nominee how to vote its shares will have no effect on the Adjournment Proposal.

If a quorum is present at the Special Meeting, abstentions and “broker non-votes” will have no effect on the Adjournment Proposal.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “FOR” the Adjournment Proposal, if necessary or appropriate, to solicit additional proxies, if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

Q:    What will happen if the stockholders do not approve the Compensation Proposal at the Special Meeting?

A:    Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on Sanderson Farms. Therefore, if the other requisite stockholder approvals are obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to Sanderson Farms’ named executive officers in accordance with the terms and conditions of the applicable agreements.

Q:    What do I need to do now?

A:    You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including, but not limited to, the Merger Agreement, along with all of the documents that we refer to

 

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in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying reply envelope, or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card), so that your shares can be voted at the Special Meeting. If you are a Beneficial Owner, to vote your shares, please refer to the voting instruction forms provided by your bank, broker or other nominee.

Q:    Should I surrender my share certificates or book-entry shares now?

A:    No. After the Merger is completed, the paying agent will send each holder of record a letter of transmittal and written instructions that explain how to exchange shares of Sanderson Farms common stock represented by such holder’s share certificates or book-entry shares for the Merger Consideration.

Q:    What happens if I sell or otherwise transfer my shares of Sanderson Farms common stock after the Record Date but before the Special Meeting?

A:    The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your shares of Sanderson Farms common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Sanderson Farms in writing of such special arrangements, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your shares of Sanderson Farms common stock after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying reply envelope or grant your proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card).

Q:    What is the difference between holding shares as a stockholder of record and as a Beneficial Owner?

A:    If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, this proxy statement and your proxy card have been sent directly to you by Sanderson Farms.

If your shares are held through a bank, broker or other nominee, you are considered a Beneficial Owner. In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the Beneficial Owner, you have the right to direct your bank, broker or other nominee how to vote your shares by following their instructions for voting.

Q:    How may I vote?

A:    If you are a stockholder of record (that is, if your shares of Sanderson Farms common stock are registered in your name with Computershare, our transfer agent), there are four (4) ways to vote:

 

•

by signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope;

 

•

by visiting the Internet at the address on your proxy card;

 

•

by calling toll-free (within the United States or Canada) at the phone number on your proxy card; or

 

•

by attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

 

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A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of Sanderson Farms common stock, and to confirm that your voting instructions have been properly recorded when voting electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet by visiting the address on your proxy card or by telephone by calling the phone number on your proxy card, in each case, you may incur costs such as Internet access and telephone charges for which you will be responsible.

Even if you plan to attend the Special Meeting in person, you are strongly encouraged to vote your shares of Sanderson Farms common stock by proxy. If you are a record holder or if you obtain a “legal proxy” to vote shares that you beneficially own, you may still vote your shares of Sanderson Farms common stock in person by virtual ballot at the Special Meeting even if you have previously voted by proxy. If you are present at the Special Meeting and vote in person by virtual ballot, your previous vote by proxy will not be counted.

If you are a Beneficial Owner, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee, or, if such a service is provided by your bank, broker or other nominee, electronically over the Internet or by telephone. To vote over the Internet or by telephone through your bank, broker or other nominee, you should follow the instructions on the voting form provided by your bank, broker or nominee. You may also vote in person by obtaining a legal proxy. See “May I attend the Special Meeting and vote in person?”

Q:    If I am a Beneficial Owner, will my broker vote my shares for me?

A:    No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against approval of the Merger Agreement but will have no effect on the Compensation Proposal or the Adjournment Proposal.

Q:    May I change my vote after I have mailed my signed and dated proxy card?

A:    Yes. If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

•

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

•

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

•

delivering a written notice of revocation to the Secretary of Sanderson Farms; or

 

•

by attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

If you are a Beneficial Owner, you should contact your bank, broker or other nominee for instructions regarding how to change your vote.

Q:    What is a proxy?

A:    A proxy is your legal designation of another person to vote your shares of Sanderson Farms common stock. The written document describing the matters to be considered and voted on at the Special Meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of Sanderson Farms common stock is called a “proxy card.” Mike Cockrell and Joe F. Sanderson, Jr. are the proxy holders for the Special Meeting, with full power of substitution and re-substitution.

 

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Q:    If a stockholder gives a proxy, how are the shares voted?

A:    Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.

If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the approval of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

Q:    What should I do if I receive more than one set of voting materials?

A:    Please sign, date and return (or grant your proxy electronically over the Internet or by telephone using the instructions provided in the enclosed proxy card) each proxy card and voting instruction card that you receive.

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a stockholder of record and your shares are registered in more than one name, you will receive more than one proxy card.

Q:    Where can I find the voting results of the Special Meeting?

A:    Sanderson Farms intends to publish final voting results in a Current Report on Form 8-K to be filed with the SEC following the Special Meeting. All reports that Sanderson Farms files with the SEC are publicly available when filed. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.”

Q:    When do you expect the Merger to be completed?

A:    We are working toward completing the Merger as quickly as possible and currently expect to complete the Merger in the fourth calendar quarter of 2021 or in the first calendar quarter of 2022. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement, many of which are outside of our control.

Q:    Who can help answer my questions?

A:    If you have any questions concerning the Merger, the Special Meeting or the proxy statement, would like additional copies of the proxy statement or need help voting your shares of Sanderson Farms common stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

proxy@mackenziepartners.com

(212) 929-5500 or (800) 322-2885

 

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FORWARD-LOOKING STATEMENTS

This proxy statement includes forward-looking statements within the meaning of the “safe harbor” provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. Forward-looking statements are based on a number of assumptions about future events and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs, projections and estimates expressed in such statements. These risks, uncertainties and other factors include, but are not limited to, those discussed under “Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended October 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended July 31, 2021 of Sanderson Farms, and the following:

 

•

the timing, receipt and terms and conditions of any required governmental or regulatory approvals of the Merger and the related transactions involving affiliates of Parent that could reduce the anticipated benefits of or cause the parties to abandon the Merger;

 

•

risks related to the satisfaction of the conditions to closing the Merger (including the failure to obtain necessary regulatory approvals or the Company Stockholder Approval), and the related transactions involving affiliates of Parent, in the anticipated timeframe or at all;

 

•

the risk that any announcements relating to the Merger could have adverse effects on the market price of the Sanderson Farms common stock;

 

•

disruption from the Merger making it more difficult to maintain business and operational relationships;

 

•

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement entered into pursuant to the Merger or of the transactions involving affiliates of Parent;

 

•

risks related to disruption of management’s attention from Sanderson Farms’ ongoing business operations due to the Merger;

 

•

disruption from the Merger making it difficult to maintain business and operational relationships, including retaining and hiring key personnel and maintaining relationships with Sanderson Farms’ customers, vendors and others with whom it does business;

 

•

significant transaction costs;

 

•

the risk of litigation and/or regulatory actions related to the Merger or unfavorable results from currently pending litigation and proceedings or litigation and proceedings that could arise in the future;

 

•

other business effects, including the effects of industry, market, economic, political or regulatory conditions;

 

•

information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity, malware or ransomware attacks;

 

•

changes resulting from the COVID-19 pandemic, which could exacerbate any of the risks described above, and could include: high absentee rates that have prevented and may continue to prevent Sanderson Farms from running some of its facilities at full capacity, or could in the future cause facility closures;

 

•

an inability of contract poultry producers to manage their flocks;

 

•

supply chain disruptions for feed grains;

 

•

further changes in customer orders due to shifting consumer patterns;

 

•

disruptions in logistics and the distribution chain for Sanderson Farms’ products;

 

•

other risks relating to the operation of Sanderson Farms’ business described in its filings with the SEC;

 

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•

liquidity challenges; and

 

•

a continued or worsening decline in global commercial activity, among other unfavorable conditions.

You are cautioned not to place undue reliance on forward-looking statements made by or on behalf of Sanderson Farms. Each such statement speaks only as of the day it was made. Sanderson Farms undertakes no obligation to update or to revise any forward-looking statements. The factors described above cannot be controlled by Sanderson Farms. When used in this communication, the words “believes,” “estimates,” “plans,” “expects,” “should,” “could,” “outlook,” and “anticipates” and similar expressions as they relate to Sanderson Farms or its management are intended to identify forward looking statements. Forward-looking statements in this proxy statement may include, without limitation: statements about the potential benefits of the Merger, anticipated growth rates, Sanderson Farms’ plans, objectives, expectations, and the anticipated timing of closing the Merger.

 

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THE SPECIAL MEETING

The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.

Date, Time and Place

The Special Meeting will be held on [    ], 2021 at [    ], Central time. Due to the possible public health impact of the coronavirus (COVID-19) and to support the well-being of our employees and stockholders, Sanderson Farms will hold the Special Meeting virtually via the Internet at the virtual meeting website. You will not be able to attend the Special Meeting physically in person. We encourage you to access the Special Meeting prior to the start time leaving ample time for check in.

Purpose of the Special Meeting

At the Special Meeting, we will ask Sanderson Farms Stockholders to vote on proposals to: (i) approve the Merger Agreement; (ii) approve, on an advisory (non-binding) basis, the Compensation Proposal; and (iii) adjourn the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

Record Date; Shares Entitled to Vote; Quorum

Only stockholders of record as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. A list of stockholders entitled to vote at the Special Meeting will be available at our principal executive offices located at 127 Flynt Road, Laurel, Mississippi 39443, during regular business hours for a period of no less than 10 days before the Special Meeting and at the virtual meeting website during the Special Meeting. As of the Record Date, there were [    ] shares of Sanderson Farms common stock outstanding and entitled to vote at the Special Meeting.

The holders of a majority of the votes represented in person or by proxy entitled to be cast on a matter by voting Sanderson Farms Stockholders, present in person or represented by proxy, will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the meeting will be adjourned to solicit additional proxies.

Vote Required; Abstentions and Broker Non-Votes

The affirmative vote of the holders of two-thirds of the outstanding shares of Sanderson Farms common stock is required to approve the Merger Agreement. As of the Record Date, [    ] votes constitute two-thirds of the outstanding shares of Sanderson Farms common stock. Approval of the Merger Agreement by stockholders is a condition to the closing of the Merger.

Approval of the Compensation Proposal and the Adjournment Proposal each require, if a quorum is present, the affirmative vote of the shares of Sanderson Farms common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter to exceed the votes cast of the shares of Sanderson Farms common stock present in person or represented by proxy at the Special Meeting and entitled to vote on the subject matter opposing such proposal.

If a stockholder abstains from voting, that abstention will have the same effect as if the stockholder voted “AGAINST” the proposal to approve the Merger Agreement and “AGAINST” the proposal to approve, on an advisory (non-binding) basis, the Compensation Proposal. For stockholders who attend the meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the stockholder voted “AGAINST” any proposal to adjourn the Special Meeting to a later date to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

 

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Each “broker non-vote” will also count as a vote “AGAINST” the proposal to approve the Merger Agreement but will have no effect on the Compensation Proposal or any proposal to adjourn the Special Meeting to a later date or dates to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the Beneficial Owner of such shares. Sanderson Farms does not expect any broker non-votes at the Special Meeting because the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered routine, whereas each of the proposals to be presented at the Special Meeting is considered non-routine. As a result, no broker will be permitted to vote your shares of Sanderson Farms common stock at the Special Meeting without receiving instructions. Failure to instruct your broker on how to vote your shares will have the same effect as a vote “against” the proposal to approve the Merger Agreement.

Stock Ownership and Interests of Certain Persons

Shares Held by Sanderson Farms’ Directors and Executive Officers

As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [    ] shares of Sanderson Farms common stock, representing approximately [    ]% of the shares of Sanderson Farms common stock outstanding on the Record Date (and approximately [    ]% of the total shares of Sanderson Farms common stock outstanding when taking into account Company Equity Awards held, in the aggregate, by our directors and executive officers).

We currently expect that our directors and executive officers will vote all of their respective shares of Sanderson Farms common stock (1) “FOR” the approval of the Merger Agreement, (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal, and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

Voting of Proxies

If your shares are registered in your name with our transfer agent, Computershare, you may cause your shares to be voted by returning a signed and dated proxy card in the accompanying prepaid envelope, or you may vote in person at the Special Meeting. Additionally, you may grant a proxy electronically over the Internet or by telephone (using the instructions provided in the enclosed proxy card). You must have the enclosed proxy card available and follow the instructions on the proxy card in order to grant a proxy electronically over the Internet or by telephone. Based on your proxy cards or Internet and telephone proxies, the proxy holders will vote your shares according to your directions.

If you plan to attend the Special Meeting and wish to vote in person, you will be given a virtual ballot at the Special Meeting. If your shares are registered in your name, you are encouraged to vote by proxy even if you plan to attend the Special Meeting in person. If you attend the Special Meeting and vote in person by virtual ballot, your vote will revoke any previously submitted proxy.

Voting instructions are included on your proxy card. All shares represented by properly signed and dated proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” approval of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

 

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If you are a Beneficial Owner, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee. If such a service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form or you do not vote via the Internet or telephone through your bank, broker or other nominee, it will have the same effect as if you voted “AGAINST” the proposal to approve the Merger Agreement but will not have any effect on the Compensation Proposal or the Adjournment Proposal.

Revocability of Proxies

If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is voted at the Special Meeting by:

 

•

signing another proxy card with a later date and returning it to us prior to the Special Meeting;

 

•

submitting a new proxy electronically over the Internet or by telephone after the date of the earlier submitted proxy;

 

•

delivering a written notice of revocation to the Corporate Secretary of Sanderson Farms; or

 

•

attending the Special Meeting virtually via the Internet at the virtual meeting website and completing a virtual ballot.

If you have submitted a proxy, your appearance at the Special Meeting will not have the effect of revoking your prior proxy, provided that you do not vote in person or submit an additional proxy or revocation, which, in each case, will have the effect of revoking your proxy.

If you are a Beneficial Owner, you should contact your bank, broker or other nominee for instructions regarding how to change your vote.

Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow stockholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, postponed or delayed.

Board of Directors’ Recommendation

The Board of Directors has unanimously: (i) determined that it is in the best interests of Sanderson Farms and its stockholders, and declared it advisable, to enter into the Merger Agreement in accordance with the DLLCA and MBCA and consummate the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; (ii) adopted the plan of merger set forth in the Merger Agreement; (iii) approved the execution and delivery of the Merger Agreement by Sanderson Farms, the performance by Sanderson Farms of its covenants and other obligations under the Merger Agreement, and the consummation of the Merger upon the terms and subject to the conditions set forth in the Merger Agreement; and (iv) resolved to recommend that holders of Sanderson Farms common stock approve the Merger Agreement in accordance with the DLLCA and MBCA.

The Board of Directors unanimously recommends that you vote: (1) “FOR” the approval of the Merger Agreement; (2) “FOR,” on an advisory (non-binding) basis, the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes to approve the Merger Agreement at the time of the Special Meeting.

 

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Solicitation of Proxies

The expense of soliciting proxies will be borne by Sanderson Farms. We have retained MacKenzie Partners, Inc. (“MacKenzie”), a proxy solicitation firm, to solicit proxies in connection with the Special Meeting at a cost of approximately $50,000 plus reimbursement of out-of-pocket expenses. We will also indemnify MacKenzie against losses arising out of its provisions of these services on our behalf. In addition, we may reimburse banks, brokers and other nominees representing Beneficial Owners of shares for their expenses in forwarding soliciting materials to such Beneficial Owners. Proxies may also be solicited by our directors, officers and employees, personally or by telephone, email, fax, over the Internet or other means of communication. No additional compensation will be paid for such services.

Anticipated Date of Completion of the Merger

Assuming timely satisfaction of necessary closing conditions, including the approval by Sanderson Farms Stockholders of the proposal to approve the Merger Agreement, we anticipate that the Merger will be consummated in the fourth calendar quarter of 2021 or in the first calendar quarter of 2022.

No Appraisal Rights

Appraisal rights are not available to Sanderson Farms Stockholders in connection with the Merger. See the section of this proxy statement entitled “The Merger—No Appraisal Rights.”

Delisting and Deregistration of Sanderson Farms Common Stock

If the Merger is completed, the shares of Sanderson Farms common stock will be delisted from NASDAQ and deregistered under the Exchange Act, and shares of Sanderson Farms common stock will no longer be publicly traded.

Other Matters

At this time, we know of no other matters to be voted on at the Special Meeting. If any other matters properly come before the Special Meeting, your shares of Sanderson Farms common stock will be voted in accordance with the discretion of the appointed proxy holders.

Householding of Special Meeting Materials

Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two (2) or more stockholders reside if we believe the stockholders are members of the same family. Each stockholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.

If you would like to receive your own set of our disclosure documents, please contact us using the instructions set forth below. Similarly, if you share an address with another stockholder and together both of you would like to receive only a single set of our disclosure documents, please contact us using the instructions set forth below.

If you are a stockholder of record, you may contact us by writing to Sanderson Farms at 127 Flynt Road, Laurel, Mississippi 39443. Eligible stockholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.

 

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Questions and Additional Information

If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your shares of Sanderson Farms common stock, please contact our proxy solicitor:

MacKenzie Partners, Inc.

1407 Broadway, 27th Floor

New York, NY 10018

proxy@mackenziepartners.com

(212) 929-5500 or (800) 322-2885

 

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THE MERGER

This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this document contains important information about the Merger and how it affects you.

Parties Involved in the Merger

Sanderson Farms, Inc.

127 Flynt Road

Laurel, Mississippi 39443

(601) 649-4030

Sanderson Farms, a Mississippi business corporation, is engaged in the production, processing, marketing and distribution of fresh and frozen chicken and the preparation, processing, marketing and distribution of processed and minimally prepared chicken items. We sell chill-packed, ice-packed, bulk-packed and frozen chicken, in whole, cut-up and boneless form, primarily under the Sanderson Farms^® brand name, to retailers, distributors and casual dining operators in the United States and to customers who resell frozen chicken into export markets. Sanderson Farms common stock is listed on NASDAQ under the symbol “SAFM.”

Walnut Sycamore Holdings LLC

c/o Cargill Meat Solutions Corporation

825 Douglas Ave.

Wichita, KS 67202

(316) 291-2500

and

c/o Wayne Farms Holdings LLC

c/o Continental Grain Company

767 Fifth Avenue, 15th Floor

New York, NY 10153

(212) 207-5100

Parent is a Delaware limited liability company that was formed on July 19, 2021 solely for the purpose of entering into the Merger Agreement, the Investment Agreement and related agreements and completing the transactions contemplated thereby. Parent has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement, the Investment Agreement and related agreements. Upon completion of the transactions contemplated thereby, Sanderson Farms will be an indirect wholly-owned subsidiary of Parent.

As of the date hereof, Parent is, and immediately following the consummation of the Merger, Parent will be, jointly controlled by CMSC and Holdings.

CMSC is owned and controlled by Cargill. Cargill is a global food, agriculture, financial and industrial products company headquartered in Wayzata, Minnesota, with operations in more than 70 countries. Cargill, a 156-year-old private, family-owned company, operates its global Protein business through three groups: Cargill Protein – North America, Cargill Protein – Asia & Europe, and Cargill Protein – Latin America. Cargill Protein – North America is Cargill’s largest protein business and an industry leader that produces, distributes and markets fresh, frozen and cooked beef, turkey, chicken and egg products, sauces, soups, case ready products, pet treats and by-products to retail, foodservice and food ingredient companies throughout North America, and exports meat and by-products around the world. Cargill Protein – North America is headquartered in Wichita, Kansas,

 

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has more than 28,000 employees and operates approximately 60 protein facilities, distribution centers, feed mills, hatcheries and innovation centers in the United States and Canada, in addition to maintaining international sales offices. Collectively, with its Asia, Europe and Latin America operations, Cargill Protein is a leading global player in the protein industry.

Holdings is majority-owned by CGC, a privately-held, family-owned company focused on operating and value-added investing in the food and agriculture sectors. Its focus and heritage uniquely position CGC to understand the challenges and opportunities that food and agriculture companies face across all aspects of the value chain. CGC is a recognized leader in the space, with more than 200 years of experience in agribusiness and global trade. By applying its global network, deep industry knowledge and permanent capital base, CGC seeks to create sustainable long-term value while developing close working relationships with the management teams and equity partners of its portfolio companies.

CGC has a long history as an owner, operator and investor in the poultry and protein industries. Wayne Farms has been majority-owned by CGC since 1965. Outside of poultry, CGC has extensive experience in other sectors of the protein industry. This includes experience from long-term ownership of Premium Standard Farms / Smithfield Foods (exited 2013), a pork production business with CGC’s operations as an important platform that grew organically and via mergers and acquisitions into the United States’ largest swine operation. It also includes expertise from long-term ownership of Five Rivers Ranch Cattle Feeding (exited 2008), a cattle feeding business with 11+ feed yards across the United States, formed in 2005 through the combination of CGC’s and Smithfield’s feed operations to become the largest United States feed lot.

Wayne Farms, a subsidiary of Holdings and a majority-owned subsidiary of CGC since 1965, is the seventh-largest vertically integrated poultry producer in the United States with annual sales exceeding $2 billion. Wayne Farms owns and operates nine fresh and two further-processed facilities throughout the Southeast of the United States, processes over 2.8 billion pounds of poultry products each year and employs more than 9,000 individuals.

Wayne Farms has prospered through a strategic focus on being a low-cost producer with leading quality and long-tenured strategic customer relationships spanning several decades across a long list of blue-chip customers. Its main sales channel is the food service sector under the Wayne Farms, Platinum Harvest, Ladybird, and Naked Truth brands. In 2018, Wayne Farms opened a Customer Innovation Center in Decatur, Alabama with a fully-equipped culinary kitchen to collaborate and test new concepts or products with its customers. Wayne Farms consistently ranks in the top quartile across industry operating key performance indicators measured by Agri Stats, an independent industry assessor. Wayne Farms’ operations have delivered leading results through forming strategic partnerships with key vendors, customers and a continual focus on operational improvements and efficiency across different bird types. Wayne Farms operates in both the big and small bird segments of the chicken market.

Led by Chairman and Chief Executive Officer Clint Rivers, a 38-year industry veteran, Wayne Farms boasts a management team with substantial knowledge and experience in the United States poultry industry as well as long tenure at the business, with a strong succession plan in place for key leadership across the organization. This experienced management team, supported by a leading global agribusiness company in CGC and minority strategic partner HOOPP, has led to a successful and sustained track record of organic above market growth in the poultry industry over decades. Wayne Farms’ success is a result of the culture embodied throughout the organization, making Wayne Farms an excellent place to work for all employees, where its core values allow for a safe workplace environment and help drive a continuous improvement mindset. Wayne Farms is extremely focused on making sure it sets a high bar for its animal welfare standards at the farm, and for food safety and quality assurance within its facilities. The management team has experience with expansions across its portfolio, including in two of its facilities in southern Alabama over the last several years.

Sycamore Merger Sub LLC

c/o Cargill Meat Solutions Corporation

825 Douglas Ave.

Wichita, KS 67202

(316) 291-2500

 

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and

c/o Wayne Farms Holdings LLC

c/o Continental Grain Company

767 Fifth Avenue, 15th Floor

New York, NY 10153

(212) 207-5100

Merger Sub is a Delaware limited liability company that was formed on July 19, 2021 solely for the purpose of entering into the Merger Agreement and completing the transactions contemplated thereby. Merger Sub has not conducted any business operations other than in connection with the transactions contemplated by the Merger Agreement.

Effect of the Merger

Upon the terms and subject to the conditions of the Merger Agreement, Merger Sub will merge with and into Sanderson Farms and the separate corporate existence of Merger Sub will cease, with Sanderson Farms continuing as the Surviving Corporation. As a result of the Merger, Sanderson Farms will become an indirect wholly-owned subsidiary of Parent, and Sanderson Farms common stock will no longer be publicly traded and will be delisted from NASDAQ. In addition, Sanderson Farms common stock will be deregistered under the Exchange Act, and we will no longer file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the Surviving Corporation.

The Effective Time will occur upon the filing of articles of merger with the Secretary of State of the State of Mississippi (or at such later time as Sanderson Farms and Parent may agree and specify in the articles of merger in accordance with the MBCA).

Effect on Sanderson Farms if the Merger Is Not Completed

If the Merger Agreement is not adopted by stockholders, or if the Merger is not completed for any other reason:

 

i.

the stockholders will not be entitled to, nor will they receive, any payment for their respective shares of Sanderson Farms common stock pursuant to the Merger Agreement;

 

ii.

(a) Sanderson Farms will remain an independent public company; (b) Sanderson Farms common stock will continue to be listed and traded on NASDAQ and registered under the Exchange Act; and (c) Sanderson Farms will continue to file periodic reports with the SEC;

 

iii.

we anticipate that (a) management will operate the business in a manner similar to that in which it is being operated today and (b) stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including, but not limited to, risks and uncertainties with respect to Sanderson Farms’ business, prospects and results of operations, as such may be affected by, among other things, the highly competitive industry in which Sanderson Farms operates and economic conditions;

 

iv.

the price of Sanderson Farms common stock may decline significantly, and if that were to occur, it is uncertain when, if ever, the price of Sanderson Farms common stock would return to the price at which it trades as of the date of this proxy statement;

 

v.

the Board of Directors will continue to evaluate and review Sanderson Farms’ business operations, strategic direction and capitalization, among other things, and will make such changes as are deemed appropriate; irrespective of these efforts, it is possible that no other transaction acceptable to the Board of Directors will be offered or that Sanderson Farms’ business, prospects and results of operations will be adversely impacted;

 

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vi.

under certain circumstances, Sanderson Farms will be required to pay Parent a termination fee equal to $158 million if (i) Sanderson Farms has terminated the Merger Agreement to enter into a definitive agreement providing for a Superior Proposal, in accordance with the terms of the Merger Agreement; (ii) Parent has terminated the Merger Agreement because of a Change of Recommendation; or (iii) in connection with an Alternative Proposal (subject to certain other conditions) (see the section of this proxy statement entitled “Proposal 1: Approval of the Merger Agreement—Company Termination Fee”); and

 

vii.

under certain circumstances, Parent will be required to (i) pay a termination fee of $300 million should Parent either breach the Merger Agreement or fail to pay the equity financing following the Company Stockholder Approval at the closing of the Merger (subject to certain other conditions) and, in each case, certain closing conditions of the Investment Agreement were not satisfied or waived, including the absence of a Wayne Farms Material Adverse Effect or (ii) pay a termination fee of $250 million if (A) Parent fails to secure the debt financing at the closing of the Merger (other than as a result of the inability of the closing to occur under the Investment Agreement due to the failure of certain conditions to the obligations of CMSC set forth in the Investment Agreement to have been satisfied or waived) following the Company Stockholder Approval at the closing of the Merger (subject to certain other conditions) or (B) the Antitrust Closing Condition is not satisfied (subject to certain other conditions) (see the section of this proxy statement entitled “Proposal 1: Approval of the Merger Agreement—Parent Termination Fee”).

Background of the Merger

As part of Sanderson Farms’ ongoing consideration and evaluation of its long-term strategic goals and plans, the Board of Directors and Sanderson Farms’ senior management, with the assistance of financial and legal advisors, periodically review, consider and assess Sanderson Farms’ operations and financial performance and overall industry conditions, as well as the Company’s succession plan, as they may affect those strategic goals and plans. This review includes, among other matters, the consideration of potential opportunities for business combinations, acquisitions and other financial and strategic alternatives, including a potential expansion of its footprint through the construction of one or more new poultry complexes. The Board of Directors has also regularly engaged with Sanderson Farms’ stockholders to discuss and solicit their perspectives on its strategic and financial direction. In these discussions, Sanderson Farms consulted with Centerview, a long-standing financial advisor to Sanderson Farms, in connection with various strategic and corporate finance matters, and Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”), Fishman Haygood LLP (“Fishman Haygood”) and Brunini, Grantham, Grower & Hewes, PLLC (“Brunini”), its legal advisors (the “legal advisors”).

Beginning in September 2019, the Board of Directors determined to pursue a process to explore a potential strategic transaction, which process was put on hold in early 2020 due to challenges in poultry markets and the COVID-19 pandemic.

On September 1, 2020, Sanderson Farms received an unsolicited proposal from Durational Capital Management (“Durational”) to acquire Sanderson Farms for $142 per share in cash. Durational stated in its letter that it had recently acquired a large position in Sanderson Farms’ common stock. On September 13, 2020, the Board of Directors, with the assistance of its financial and legal advisors, unanimously determined that the Durational proposal significantly undervalued Sanderson Farms and its future prospects, and that the highly conditional and opportunistic proposal was not in the best interests of Sanderson Farms or its stockholders. Sanderson Farms sent a letter to Durational on September 14, 2020, informing Durational of the Board of Directors’ determination. Several weeks later, on October 29, 2020, Sanderson Farms was contacted by several news outlets asking Sanderson Farms whether it could confirm that it had received an unsolicited proposal from Tyson Foods, Inc. (“Tyson Foods”) and Durational. In response, Sanderson Farms determined to issue a statement the same day stating that it had received an unsolicited proposal from Durational, and not from Tyson Foods, and that the Board of Directors had determined that the Durational proposal significantly undervalued Sanderson Farms and its future prospects, and that the highly conditional and opportunistic proposal was not in the best interests of Sanderson Farms or its stockholders.

 

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Throughout most of 2020 and the early months of 2021, Sanderson Farms and the Board of Directors remained focused on supporting Sanderson Farms and its employees, growers and other independent contractors through the impact of the COVID-19 pandemic, including with respect to health and safety issues as well as potential supply chain issues, as well as the impact from higher feed prices. Early 2021 brought with it optimism as to the rebound of the poultry markets for the rest of 2021, largely due to higher market prices for certain of Sanderson Farms products. The higher prices reflected increased demand fueled in part by more customers preparing meals at home during the pandemic and the “chicken sandwich wars” among various quick serve food service customers. Further, as vaccines against Covid-19 became more readily available, Sanderson Farms believed that demand from food service customers, which had already begun to recover, would continue to rise as diners became more comfortable eating in-restaurant. In early spring 2021, the Board of Directors and members of management began discussing a potential sale of Sanderson Farms and other alternatives in light of these favorable broader poultry industry trends, as well as Sanderson Farms’ overall strategic plan and competitive position.

Subsequently, at a virtual meeting held on March 30, 2021, the Board of Directors discussed and reviewed, together with Centerview and its legal advisors, Sanderson Farms’ business and strategic plan and a range of strategic alternatives potentially available to Sanderson Farms. Representatives of Centerview discussed a range of potential strategic alternatives based on management’s long-term forecasts, including continuing to execute on its standalone plan, conducting various capital allocation or capital return alternatives, including potential share repurchases or regular or special dividends, an acquisition or series of acquisitions, a separation of its Foods division, a potential sale of Sanderson Farms, and considerations associated with each alternative. Members of management also presented an updated version of the Sanderson Farms’ five-year financial forecast model to the Board of Directors and discussed key assumptions underlying such model. Representatives of Centerview also provided the Board of Directors with an overview of a potential process for the sale of Sanderson Farms, including illustrative timelines and stages for such process and potential counterparties that might be interested in such a transaction. These potential counterparties were selected based on strategic fit, financial and administrative capacity to consummate a potential transaction, likelihood of completion (including as it related to receipt of any required regulatory approvals), as well as capacity to efficiently assess interest in a potential transaction. The Board of Directors, together with management and representatives of Centerview, discussed the list of potential counterparties and various considerations associated with reaching out to, and pursuing a strategic transaction with, such parties. After discussion and deliberation, the Board of Directors determined to explore more intensively a potential sale of Sanderson Farms, authorized representatives of Centerview to contact certain of these potential counterparties to ascertain their interest in a strategic transaction involving Sanderson Farms, and authorized the legal advisors, working with management, to negotiate and execute non-disclosure agreements with potential counterparties.

Commencing on April 12, 2021, representatives of Centerview began contacting the potential counterparties regarding a potential strategic transaction. Representatives of Centerview contacted twelve potential counterparties that the Board of Directors had authorized Centerview to contact at the meeting of the Board of Directors held on March 30, 2021. Seven of the twelve potential counterparties (including each of CGC and Cargill) entered into non-disclosure agreements with Sanderson Farms and were provided with preliminary due diligence materials. All seven of the non-disclosure agreements included standstill provisions, and none of the standstill provisions remain in effect.

On April 21 and 22, 2021, representatives of CGC and Cargill contacted Centerview and requested permission to partner with one another and submit a joint bid (collectively, the “Bidder Group”), as required under their respective non-disclosure agreements, which approval was granted by Sanderson Farms’ management, based on its belief that such partnering would create more actionable bids and enhance value.

On May 4, 2021, representatives of Centerview sent a process letter to each of the seven counterparties that had entered into non-disclosure agreements with Sanderson Farms, requesting preliminary indications of interest by May 19, 2021.

On May 19, 2021, two potential counterparties submitted preliminary indications of interest to acquire Sanderson Farms for cash: the Bidder Group, which indicated a price of $200.00 per share; and a second bidder

 

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(“Bidder 2”), which indicated a price range of $200.00 to $206.00 per share. The Bidder Group contemplated effectuating the potential transaction through the acquisition of Sanderson Farms by an entity jointly owned by each of CGC and Cargill, into which CGC would contribute its ownership interests in Wayne Farms and Cargill would contribute cash equity. The remaining four potential counterparties that had executed non-disclosure agreements with Sanderson Farms did not provide preliminary indications of interest to acquire Sanderson Farms, indicating to representatives of Centerview that they were withdrawing from the process for a range of reasons, including the fact that they were interested in certain portions and not the whole of Sanderson Farms’ business or assets, that they were concerned with the certainty of completion of the strategic combination, that a potential acquisition would be too large for them to finance, or that they were focused on other strategic priorities.

At a virtual meeting held on May 24, 2021, the Board of Directors discussed and reviewed, together with Centerview and its legal advisors, the preliminary indications of interest received from the Bidder Group and Bidder 2, and other alternatives including continuing to operate Sanderson Farms on a stand-alone basis. Representatives of Centerview and Wachtell Lipton discussed and reviewed with the Board of Directors these various potential strategic alternatives, and summarized the terms and conditions of the indications of interest, discussing with the Board of Directors the key assumptions underlying the indicative valuations included in the preliminary indications of interest, proposed financing plans, timing and required internal and external approvals, as well as diligence requests made by the potential counterparties. Representatives of Centerview and Wachtell Lipton also provided the Board of Directors with a comprehensive outline for the next stages of the strategic process leading up to the announcement of a potential transaction with either of the potential counterparties, including the scheduling of management presentations and site visits, as well as the preparation and negotiation of definitive agreements with respect to such a transaction. Following discussion and deliberation, the Board of Directors authorized Sanderson Farms’ advisors, working with management, to proceed with the Sanderson Farms’ process to explore the sale of itself, permit each of the Bidder Group and Bidder 2 with access to additional diligence on Sanderson Farms, and to schedule management presentations and site visits with representatives of each of the Bidder Group and Bidder 2.

On June 2, 2021, representatives of Centerview received an inbound inquiry from a financial advisor representing an industry participant who had not previously been contacted by Centerview as part of this strategic process (“Bidder 3”). Bidder 3 thereafter entered into a non-disclosure agreement with Sanderson Farms which included a standstill provision which no longer remains in effect. On June 8, 2021, Bidder 3 withdrew from the process because of concerns regarding financing a potential acquisition on the proposed timeline.

On June 4, 2021, Sanderson Farms provided representatives of the Bidder Group and Bidder 2 with access to the virtual data room.

Between June 9 and June 11, 2021, the Bidder Group and its representatives and Bidder 2 and its representatives, including a potential equity financing source for Bidder 2, participated in separate full-day management meetings and diligence sessions hosted by Sanderson Farms in New York, New York and supervised by Centerview and Wachtell Lipton. Each meeting was preceded by dinner with the presentation’s participants, together with representatives of Centerview, the prior evening. Following these meetings, members of management and Sanderson Farms’ advisors had numerous follow-up calls and email exchanges with representatives of each of the bidders to provide additional business and financial due diligence.

On June 11, 2021, representatives of Centerview received another inbound inquiry from a financial advisor representing a financial sponsor who had not previously been contacted by Centerview as part of this strategic process (“Bidder 4”). The Company ultimately determined not to engage with Bidder 4 as Bidder 4 did not provide any financing plans or indicate a price range in their proposal.

From time to time, representatives of Centerview also received inbound inquiries on the status of a potential transaction from former potential counterparties that had since withdrawn from the process. None of these former potential counterparties expressed any interest in reengaging in the process with respect to an acquisition of the entire Company.

 

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Also on June 11, 2021, representatives of CGC notified representatives of Centerview that representatives of the Wall Street Journal had contacted representatives of CGC regarding a leak with respect to a potential transaction between Sanderson Farms and CGC.

At a remote meeting held on June 13, 2021, representatives of Centerview provided the Board of Directors with an update on the strategic process, including the progress on business and financial due diligence by each of the Bidder Group and Bidder 2, the receipt of inbound inquiries from Bidder 3 and Bidder 4, and CGC’s notification of the leak. Representatives of Centerview and Wachtell Lipton discussed with the Board of Directors potential strategies and responses should individual members of the Board of Directors be contacted by press or stockholders concerning the leak.

On June 21, 2021, the Wall Street Journal reported that Sanderson Farms was in discussions with multiple parties, including CGC, in connection with a potential sale.

On June 30, 2021, representatives of Centerview sent a process letter to the Bidder Group and Bidder 2, requesting final proposals by July 20, 2021.

On July 6, 2021, Sanderson Farms circulated a form of merger agreement to the Bidder Group and Bidder 2, and instructed the bidders to contact Wachtell Lipton with any questions.

Between May and July 2021, representatives of the Bidder Group participated in site visits in Texas, Mississippi and North Carolina and more than a dozen virtual diligence meetings with management, which virtual diligence meetings were supervised by Sanderson Farms’ financial and legal advisors. Members of management also responded, through Sanderson Farms’ advisors, to numerous follow-up diligence requests and questions from the bidders after these meetings. Bidder 2 and its representatives continued to conduct limited diligence on Sanderson Farms, but informed representatives of Centerview that they were having difficulties with obtaining the requisite financing for a potential acquisition.

On July 14, 2021, representatives of Bidder 2 indicated to representatives of Centerview that they would not be in a position to submit a final proposal and withdrew from the process because they were unable to secure the requisite financing for a potential acquisition.

On or about July 16, 2021, representatives of CGC contacted representatives of Centerview to convey that the Bidder Group could not come to agreed terms with respect to the Investment Agreement in light of certain terms in the draft Merger Agreement, and as a result would not be in a position to submit a final proposal by July 20, 2021. Over the course of July 17, 2021 and July 18, 2021, representatives of Centerview discussed with representatives CGC certain terms of the draft Merger Agreement in the context of the Investment Agreement. On July 19, 2021, representatives of the Bidder Group contacted representatives of Centerview to convey that the Bidder Group would submit a final proposal on July 20, 2021, and previewed certain terms in the Bidder Group’s markup of the draft Merger Agreement and their Investment Agreement that would be important in order for the Bidder Group to move forward, including that the cash equity contribution funded by Cargill under the Investment Agreement would be conditioned on the absence of the occurrence of a Wayne Farms Material Adverse Effect.

On July 20, 2021, representatives of the Bidder Group submitted a final proposal to acquire Sanderson Farms for $202.00 per share in cash. In addition to its final proposal, the Bidder Group submitted a mark-up of the draft Merger Agreement and accompanying disclosure schedules, an executed commitment letter and redacted fee letter from Bank of America, N.A., BofA Securities, Inc. and Coöperatieve Rabobank U.A. for up to $3.25 billion in senior secured credit facilities in connection with the transaction, and a redacted draft Investment Agreement providing for the contribution by CGC of its ownership interests in Wayne Farms and the equity financing from CMSC (an affiliate of Cargill), which the equity financing would be conditioned on, among other things, the absence of the occurrence of a Wayne Farms Material Adverse Effect.

At an in-person meeting held on July 22, 2021 (with some attendees joining virtually), the Board of Directors discussed the terms of the Bidder Group’s final proposal. Representatives of Centerview provided an

 

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overview of the strategic process leading up to the date of the meeting, and summarized the material terms of the Bidder Group’s final proposal. Representatives of Wachtell Lipton then provided a summary of the terms reflected in the current draft of the transaction documents as submitted by the Bidder Group. Members of management also presented an updated version of Sanderson Farms’ five-year financial forecast model to the Board of Directors and discussed key assumptions underlying such model. The updated forecast model reflected increased earnings expectations for the fiscal year ended October 31, 2021 as a result of improvements in poultry markets but was otherwise substantially the same as the forecast model presented at the meeting of the Board of Directors held on March 30, 2021. Following discussion, representatives of Centerview reviewed with the Board of Directors the premiums and multiples implied by the Bidder Group’s final proposal in the context of trading multiples for selected public companies and multiples implied by selected precedent transactions. The Board of Directors then engaged in a discussion regarding the valuation of Sanderson Farms implied by the Bidder Group’s $202.00 per share proposal in the context of the analyses provided by Centerview, as well as the assumptions underlying management’s projections and the risks and uncertainties associated with achieving such projections. The Board of Directors discussed next steps as well as strategies for seeking an increase in the price and an improvement in the other terms offered by the Bidder Group in their final proposal.

Between July 22, 2021 and July 24, 2021, management continued to refine Sanderson Farms’ counterproposal with Centerview and Sanderson Farms’ legal advisors, based on the direction provided by the Board of Directors.

On July 25, 2021, representatives of Centerview contacted representatives of the Bidder Group to convey Sanderson Farms’ counterproposal, which included a cash merger consideration of $206.00 per share as well as Sanderson Farms’ position on certain issues concerning regulatory approvals, certain employee matters, the amount and circumstances pursuant to which certain termination fees would be payable and remedies available to the party in the case of a willful and intentional breach by the other party.

Later that day, representatives of Wachtell Lipton sent representatives of Paul, Weiss, Rifkind, Wharton & Garrison LLP (“Paul Weiss”), CGC’s legal advisor, and representatives of Freshfields Bruckhaus Deringer US LLP (“Freshfields”), Cargill’s legal advisor, a revised draft of the Merger Agreement reflecting the counterproposal as conveyed by Centerview.

On July 27, 2021, representatives of the Bidder Group provided a revised proposal to acquire Sanderson Farms for $203.00 per share in cash, and conveyed to representatives of Centerview and representatives of Wachtell Lipton (through their legal advisors) their proposal concerning the issues regarding regulatory approvals, certain employee matters, termination fees and remedies in the event of a willful and intentional breach of the Merger Agreement.

Also on July 27, 2021, representatives of Wachtell Lipton sent representatives of Paul Weiss and Freshfields a revised draft of the disclosure schedules, Investment Agreement and debt commitment letter.

On August 2, 2021, at the request of the Board of Directors in order to help better assess the risk as to whether a Wayne Farms Material Adverse Effect could occur, thereby relieving Cargill of its obligation to fund the cash equity contribution pursuant to the Investment Agreement, members of Sanderson Farms’ management and its legal and financial advisors attended a general diligence session hosted by representatives of Wayne Farms. A further session was held on August 3, 2021 among the parties’ respective legal counsels to discuss certain legal matters pertaining to Wayne Farms.

From July 27, 2021 to August 7, 2021, representatives of Wachtell Lipton exchanged drafts of the Merger Agreement and other transaction documents with representatives of Paul Weiss and Freshfields and held several calls to negotiate the final terms of such documents. During this period, representatives of Centerview also held several calls with representatives of CGC and Cargill to discuss open issues. Representatives of Wachtell Lipton negotiated several legal issues with representatives of Paul Weiss and Freshfields, including issues relating to termination fees and remedies, the treatment of equity awards and employee matters, and the remedies of the parties (including the right to specific performance and damages in the event of a termination of the Merger Agreement).

 

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At a virtual meeting held on August 7, 2021, representatives of Wachtell Lipton provided the Board of Directors with a summary of the terms of the draft of the Merger Agreement and financing documents, noting changes from the summary of the Merger Agreement previously provided to the Board of Directors. Representatives of Wachtell Lipton provided a summary of the proposed employment and compensation arrangements between certain members of management and the Bidder Group following the consummation of the proposed transaction, as well as the regulatory approvals that will be required in connection with the transaction, and the covenants of the parties in the draft transaction documents related to such regulatory efforts. Management then provided the Board of Directors with a summary of its financial and business due diligence on Wayne Farms, referencing a diligence report previously provided to the Board of Directors. Representatives of Centerview then reviewed with the Board of Directors their valuation analyses with respect to Sanderson Farms based on management’s projections. Representatives of Wachtell Lipton, assisted by representatives of Brunini and Fishman Haygood, discussed with the Board of Directors its fiduciary duties under Mississippi law in connection with a potential sale of Sanderson Farms. Following this discussion, representatives of Centerview left the meeting, at which point representatives of Wachtell Lipton and Fishman Haygood reviewed Centerview’s draft engagement letter and relationships disclosure letter made available to the Board of Directors prior to the meeting. The representatives of Wachtell Lipton and Fishman Haygood discussed Centerview’s relationships with CGC, Cargill and/or their respective affiliates that had been disclosed. The Board of Directors reviewed the disclosures and determined that none of Centerview’s disclosed relationships with CGC, Cargill and/or their respective affiliates constituted a disqualifying conflict with respect to its engagement by Sanderson Farms in connection with the potential transaction. After further discussion and deliberation, the Board of Directors unanimously approved Sanderson Farms’ entry into the engagement letter with Centerview.

Later that day, following the board meeting, Sanderson Farms entered into the engagement letter with Centerview.

On August 8, 2021, the Board of Directors held a virtual meeting to discuss and consider whether to approve Sanderson Farms’ entry into definitive transaction documents providing for a merger of Sanderson Farms with and into an affiliate of the Bidder Group. Representatives of Wachtell Lipton, assisted by representatives of Brunini and Fishman Haygood, discussed with the Board of Directors its fiduciary duties under Mississippi law in connection with a potential sale of Sanderson Farms. Representatives of Wachtell Lipton then summarized the terms of the draft of the Merger Agreement and financing documents compared to the terms previously reviewed, referencing the summary of the Merger Agreement previously provided to the Board of Directors. Representatives of Wachtell Lipton provided a summary of the proposed employment and compensation arrangements between certain members of management and the Bidder Group following the consummation of the proposed transaction, as well as the regulatory approvals that will be required in connection with the transaction, and the covenants of the parties in the draft transaction documents related to such regulatory efforts. The members of the Compensation Committee of the Board of Directors (the “Compensation Committee”) convened a meeting and approved the proposed employment and compensation arrangements in connection with the proposed transaction. Thereafter, representatives of Centerview presented to the Board of Directors Centerview’s financial analysis and rendered to the Board of Directors its oral opinion, which was subsequently confirmed in writing on the same date, to the effect that, as of such date and based upon and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, as set forth in its written opinion, the $203.00 per share in cash to be paid to the holders of shares of common stock pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. Following this discussion, representatives of Centerview left the meeting, at which point the Board of Directors discussed with the legal advisors their perspectives on the proposed transaction. After further discussion and deliberation, the Board of Directors unanimously approved the transaction documents and the Merger and resolved to recommend that the stockholders of Sanderson Farms approve the Merger Agreement.

Later that day, following the board meeting, the parties executed the final agreements.

The parties issued a joint press release announcing the transaction early in the morning of August 9, 2021.

 

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Reasons for the Merger; Recommendation of the Board of Directors

The Board of Directors, in consultation with the legal advisors and financial advisors and the management team, evaluated the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, and unanimously (i) determined that it is fair to and in the best interests of Sanderson Farms and its stockholders, and declared it advisable, to enter into the Merger Agreement, (ii) adopted the plan of merger set forth in this Merger Agreement, (iii) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, and (iv) recommends the approval of the Merger Agreement by the stockholders of Sanderson Farms.

In the course of reaching its recommendation, the Board of Directors considered a number of positive factors relating to the Merger Agreement and the Merger, each of which the Board of Directors believed supported its decision, including the following:

Premium and Multiples.    The Board of Directors considered the current and historical market prices of the common stock, including the market performance of the common stock relative to those of other participants in Sanderson Farms’ sector and general market indices, and the fact that the merger consideration of $203.00 per share in cash represents a substantial premium to estimates of Sanderson Farms’ unaffected stock price, including a premium of 30.3% to Sanderson Farms’ stock price on June 19, 2021, the trading day immediately prior to the leak published in the Wall Street Journal, a premium of 22.8% to Sanderson Farms’ 30-day volume-weighted average stock price as of June 18, 2021 and a premium of 15.2% to Sanderson Farms’ all-time high stock price as of June 18, 2021.

Best Alternative for Maximizing Stockholder Value / Thorough Process. The Board of Directors considered that the present value of the merger consideration of $203.00 in cash per share was more favorable to Sanderson Farms’ stockholders than the potential value that might result from other alternatives reasonably available to Sanderson Farms, including, but not limited to, special dividends or distributions, leveraged stock repurchases, an acquisition or a series of acquisitions, an asset sale or divestiture of a business segment of Sanderson Farms, and the continued operation of Sanderson Farms on a stand-alone basis in light of a number of factors, including the following:

 

•

That positive macroeconomic and industry factors, including increased demand in the Company’s products and the resurgence of the poultry industry post-Covid 19, as well as internal factors, such as Sanderson Farms’ valuation and management’s projections, suggested that this would be an opportune time to explore a sale process and obtain maximum value for Sanderson Farms’ stockholders;

 

•

That Sanderson Farms had conducted a lengthy and thorough process since the Board of Directors’ decision to explore a strategic process on March 30, 2021, involving outreach to 12 potential acquirers and inbound inquiries from 2 potential acquirers, of which 8 entered into non-disclosure agreements with Sanderson Farms and received due diligence, 2 provided first round indications of interest, and one party — the Bidder Group — provided a final definitive proposal;

 

•

That the Bidder Group stated the $203.00 in cash per share proposal represented the Bidder Group’s best and final proposal following the Board of Directors’ rejection of the Bidder Group’s first two proposed final proposals, offering, respectively, $200.00 per share and $202.00 per share;

 

•

That the fact that Sanderson Farms was exploring a strategic transaction was well publicized since the leak published in the Wall Street Journal (including through various subsequent news reports) and that Sanderson Farms and Centerview responded to third parties who expressed interest in a possible transaction on an unsolicited basis and who they believed were reasonably capable of consummating a transaction, by offering such third parties the opportunity to conduct due diligence and make a proposal, subject only to the requirement that they enter into a customary non-disclosure agreement; and

 

•

That the Board of Directors had conducted extensive deliberations over a period of five months in connection with the strategic process, at both regularly scheduled and special meetings attended by all members of the Board of Directors, to discuss updates regarding the strategic process.

 

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Opinion of Centerview Partners LLC.    The Board of Directors considered the financial analysis presentation of Centerview and the oral opinion of Centerview rendered to the Board of Directors on August 8, 2021, which were subsequently confirmed in writing on the same date, to the effect that, as of such date and based upon and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, as set forth in Centerview’s written opinion, the $203.00 per share in cash to be paid to the holders of shares of common stock in the Merger Agreement was fair, from a financial point of view, to such holders, as more fully described below in the section entitled “— Opinion of Centerview Partners LLC.”

Greater Certainty of Value.    The Board of Directors considered that the proposed merger consideration is all cash, so that the transaction allows Sanderson Farms’ stockholders to realize a fair value for their investment and provides such stockholders certainty of value for their shares, especially when viewed against the risks inherent in Sanderson Farms’ business, including the following:

 

•

That Sanderson Farms’ business plan and the Management Projections (as defined in the section of this proxy statement entitled “The Merger—Management Projections”) are based, in part, on projections for a number of variables, including feed grain costs, poultry markets and chicken prices, the cost to build new facilities and continue Sanderson Farms’ organic growth strategy, global macroeconomic conditions, labor costs and availability, and the strength and timing of post-pandemic economic growth, that are difficult to project and subject to certain market and sector risks not viewed by management as within the control of Sanderson Farms;

 

•

That the financial projections set forth in the Management Projections were subject to certain market and sector risks not viewed by management as within the control of Sanderson Farms that, based upon the Board of Directors’ knowledge of Sanderson Farms’ business, as well as the views expressed by stockholders, potential counterparties, and market analysts with respect to broader sector conditions and competitive dynamics might adversely affect Sanderson Farms’ ability to realize the Management Projections; and

 

•

That the Board of Directors believed the merger consideration was fair in light of Sanderson Farms’ business, operations, financial condition, strategy and prospects as well as Sanderson Farms’ historical financial performance and projected financial performance as reflected in the Management Projections.

Likelihood of Completion.    The Board of Directors considered the likelihood of completion of the Merger in light of the terms of the Merger Agreement and the closing conditions, including:

 

•

The commitment of Parent and Merger Sub in the Merger Agreement to use reasonable best efforts to complete the Merger as soon as practicable, including to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable under applicable Laws to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement as promptly as practicable, and to obtain antitrust approvals, subject to actions that would have material adverse effect on the post-closing business of Parent and its subsidiaries (including the surviving corporation);

 

•

The fact that Parent had obtained committed debt financing for the transaction from reputable financial institutions and committed equity financing from CMSC for the full amount of equity required in connection with the committed debt financing, the limited number and nature of the conditions to the debt and equity financing, and the obligation of Parent and Merger Sub to use reasonable best efforts to consummate the financing and that such financing provides funding of an amount sufficient for the satisfaction of Parent’s and Merger Sub’s obligations under the Merger Agreement, including the payment of the merger consideration, and any payments in respect of equity compensation, fees and expenses, and any repayment of any outstanding indebtedness of Sanderson Farms;

 

•

Sanderson Farms’ ability, under circumstances specified in the Merger Agreement, to specifically enforce Parent’s obligation to enforce the equity financing commitment and to cause Parent to cause CMSC to fund the equity financing and Holdings to fund its contribution of its membership interests in Wayne Farms as contemplated by the Merger Agreement and the Investment Agreement;

 

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•

Sanderson Farms’ view that the Investment Agreement reflects an arm’s-length agreement between Cargill and CGC, and their respective subsidiaries, after conducting considerable diligence on one another and contains very limited exceptions for either party to be relieved of its obligations to be performed under the Investment Agreement, including Cargill’s obligation to fund the equity financing;

 

•

The fact that Wayne Farms has agreed to certain restrictions on the conduct of its business before completion of the Merger, including covenants to use commercially reasonable efforts to conduct its business in all material respects in the ordinary course and not take any action or omit to take any action that would reasonably be expected to result in the failure of the conditions to Cargill’s obligation to fund the equity financing under the Investment Agreement;

 

•

The commitment of Parent in the Merger Agreement to pay Sanderson Farms a termination fee in an amount equal to $300 million in the event that the Merger Agreement is terminated due to a Parent financing failure as a result of a material adverse effect on Wayne Farms, or $250 million in the event that the Merger Agreement is terminated due to a Parent financing failure that did not result from a Wayne Farms Material Adverse Effect or due to a failure to obtain certain regulatory approvals (see the section of this proxy statement entitled “The Merger Agreement — Parent Termination Fees”); and

 

•

The conditions to closing contained in the Merger Agreement, which are limited in number and scope, and which, in the case of the condition related to the accuracy of Sanderson Farms representations and warranties, are generally subject to certain materiality or material adverse effect qualifiers.

Opportunity to Receive Alternative Proposals and to Terminate the Merger Agreement in Order to Accept a Superior Proposal.    The Board of Directors considered the terms of the Merger Agreement relating to Sanderson Farms’ ability to respond to unsolicited alternative proposals, and the other terms and conditions of the Merger Agreement, including:

 

•

Sanderson Farms’ right, subject to certain conditions, to provide information in response to, and to discuss and negotiate, certain unsolicited alternative proposals made before the Company Stockholder Approval is obtained;

 

•

The provisions of the Merger Agreement allowing the Board of Directors to make a change of recommendation prior to obtaining the Company Stockholder Approval in specified circumstances relating to a Superior Proposal or an Intervening Event, subject to Parent’s right to terminate the Merger Agreement and receive payment of a termination fee of $158 million; and

 

•

The fact that as of the date of this proxy statement, since the announcement of the transaction with the Bidding Group, no person has made an unsolicited offer or proposal to acquire Sanderson Farms.

Opportunity for Sanderson Farms Stockholders to Vote.    The Board of Directors also considered the fact that the Merger would be subject to the approval of the Sanderson Farms Stockholders, and the Sanderson Farms Stockholders would be free to evaluate the Merger and vote for or against the approval of the Merger Agreement at the Sanderson Farms stockholders’ meeting.

Treatment of Employees.    The Board of Directors considered that the Merger Agreement provided for attractive post-closing compensation and other benefits to employees, and that the treatment of the restricted common stock and performance share awards was fair to employee holders, as more fully described below in the section entitled “— Treatment of Company Equity Awards”;

In the course of reaching its recommendation, the Board of Directors also considered certain risks and potentially adverse factors relating to the Merger Agreement and the Merger, including:

 

•

That Sanderson Farms’ stockholders will not be entitled to any ongoing equity participation in Sanderson Farms following the Merger, and that such stockholders will therefore cease to participate in Sanderson Farms’ future earnings or growth, if any, or to benefit from increases, if any, in the value of Sanderson Farms’ common stock following the Merger;

 

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•

The provisions of the Merger Agreement that restrict Sanderson Farms’ ability to solicit or participate in discussions or negotiations regarding alternative acquisition proposals, subject to certain exceptions, and that restrict Sanderson Farms from entering into alternative acquisition agreements;

 

•

The possibility that the Merger is not completed in a timely manner or at all for any reason, including as a result of the failure to receive the required regulatory approvals or as a result of there having been a Wayne Farms Material Adverse Effect, the latter being an event over which Sanderson Farms would have little or no ability to prevent from occurring;

 

•

The risks and costs to Sanderson Farms if the Merger is not completed or if there is uncertainty about the likelihood, timing or effects of completion of the Merger, including uncertainty about the effect of the Merger on the employees, customers, growers, producers, vendors of Sanderson Farms and other third parties, which could impair Sanderson Farms’ ability to attract, retain and motivate key personnel and could cause third parties to seek to terminate, change or not enter into business relationships with Sanderson Farms, as well as the risk of management distraction from ongoing business operations as a result of the Merger, and the effect on the trading price of Sanderson Farms common stock if the Merger Agreement is terminated or the Merger is not completed for any reason;

 

•

The Merger Agreement’s restrictions on the conduct of Sanderson Farms’ business before completion of the Merger, generally requiring Sanderson Farms to use commercially reasonable efforts to conduct its business in all material respects in the ordinary course and preserve intact in all material respects its business organization, employee relationships, assets and properties, its existence in good standing, and its business relationships, and prohibiting Sanderson Farms from taking specified actions, which could delay or prevent Sanderson Farms from undertaking certain business opportunities that arise pending completion of the Merger;

 

•

The possibility that Sanderson Farms could be required under the terms of the Merger Agreement to pay a termination fee of $158 million under certain circumstances (see the section of this proxy statement entitled “The Merger Agreement — Company Termination Fee”), and that such termination fee could discourage other potential bidders from making a competing bid to acquire Sanderson Farms;

 

•

The fact that Sanderson Farms’ remedies in the event of a willful and material breach of the Merger Agreement by Parent or Merger Sub would be capped at $425 million (or, under certain circumstances, $300 million);

 

•

The unavailability of appraisal rights under Mississippi law to holders of shares of common stock who do not vote in favor of the approval of the Merger Agreement, which would deprive such stockholders of the opportunity to have a court determine the fair value of their shares, which may be more than, less than, or the same as the amount such stockholders would receive under the Merger Agreement;

 

•

That the receipt of cash by Sanderson Farms’ stockholders in exchange for their shares of common stock pursuant to the Merger will generally be a taxable transaction to the Sanderson Farms Stockholders for U.S. federal income tax purposes; and

 

•

That some of the Sanderson Farms’ directors and executive officers have interests that may be different from, or in addition to, the interests of the Sanderson Farms Stockholders generally. See the section of this proxy statement entitled “Interests of Sanderson Farms’ Directors and Executive Officers in the Merger.”

The foregoing discussion of the information and factors considered by the Board of Directors includes the material factors considered by the Board of Directors but is not intended to be exhaustive and does not necessarily include all of the factors considered by the Board of Directors. In view of the complexity and variety of factors considered in connection with its evaluation of the Merger Agreement and the Merger, the Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The above factors are not presented in any order of priority. The explanation of the factors and reasoning set forth above contains forward-looking statements that should be read

 

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in conjunction with the section of this proxy statement entitled “Cautionary Statement Concerning Forward-Looking Statements.”

After careful consideration, the Board of Directors has unanimously (i) determined that it is fair to and in the best interests of Sanderson Farms and its stockholders, and declared it advisable, to enter into the Merger Agreement, (ii) adopted the plan of merger set forth in the Merger Agreement, (iii) approved the execution, delivery and performance of the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, and (iv) recommends the approval of the Merger Agreement by the stockholders of Sanderson Farms.

The Board of Directors unanimously recommends that Sanderson Farms stockholders vote “FOR” the approval of the Merger Agreement.

Opinion of Centerview Partners LLC

On August 8, 2021, Centerview rendered to the Board of Directors its oral opinion, subsequently confirmed in a written opinion dated August 8, 2021, that, as of such date and based upon and subject to various assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, the Merger Consideration to be paid to the holders of Sanderson Farms common stock (other than Excluded Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders.

The full text of Centerview’s written opinion, dated August 8, 2021, which describes the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion, is attached as Annex B and is incorporated herein by reference. The summary of the written opinion of Centerview set forth below is qualified in its entirety by the full text of Centerview’s written opinion attached as Annex B. Centerview’s financial advisory services and opinion were provided for the information and assistance of the Board of Directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction and Centerview’s opinion only addressed the fairness, from a financial point of view, as of the date thereof, to the holders of Sanderson Farms common stock (other than Excluded Shares) of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. Centerview’s opinion did not address any other term or aspect of the Merger Agreement or the Transaction and does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter.

The full text of Centerview’s written opinion should be read carefully in its entirety for a description of the assumptions made, procedures followed, matters considered, and qualifications and limitations upon the review undertaken by Centerview in preparing its opinion.

In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:

 

•

an execution version of the Merger Agreement dated August 8, 2021;

 

•

Sanderson Farms’ Annual Reports on Form 10-K for the fiscal years ended October 31, 2020, October 31, 2019 and October 31, 2018;

 

•

certain interim reports to stockholders and Quarterly Reports on Form 10-Q of the Company;

 

•

certain publicly available research analyst reports for the Company;

 

•

certain other communications from the Company to its stockholders; and

 

•

certain internal information relating to the business, operations, earnings, cash flow, assets, liabilities and prospects of the Company, including certain financial forecasts, analyses and projections relating

 

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to the Company prepared by management of the Company and furnished to Centerview by the Company for purposes of Centerview’s analysis, which are referred to in this summary of Centerview’s opinion as the “Forecasts,” and which are collectively referred to in this summary of Centerview’s opinion as the “Internal Data.”

Centerview also participated in discussions with members of the senior management and representatives of the Company regarding their assessment of the Internal Data. In addition, Centerview reviewed publicly available financial and stock market data, including valuation multiples, for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly available, of certain other transactions that Centerview deemed relevant, and conducted such other financial studies and analyses and took into account such other information as Centerview deemed appropriate.

Centerview assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by Centerview for purposes of its opinion and, with the Company’s consent, Centerview relied upon such information as being complete and accurate. In that regard, Centerview assumed, at the Company’s direction, that the Internal Data (including, without limitation, the Forecasts) were reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered thereby and Centerview relied, at the Company’s direction, on the Internal Data for purposes of Centerview’s analysis and opinion. Centerview expressed no view or opinion as to the Internal Data or the assumptions on which it was based. In addition, at the Company’s direction, Centerview did not make any independent evaluation or appraisal of any of the assets or liabilities (contingent, derivative, off-balance-sheet or otherwise) of the Company, nor was Centerview furnished with any such evaluation or appraisal, and was not asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. Centerview assumed, at the Company’s direction, that the final executed Merger Agreement would not differ in any respect material to Centerview’s analysis or opinion from the execution version reviewed by Centerview. Centerview also assumed, at the Company’s direction, that the Transaction will be consummated on the terms set forth in the Merger Agreement and in accordance with all applicable laws and other relevant documents or requirements, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to Centerview’s analysis or Centerview’s opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Transaction, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to Centerview’s analysis or Centerview’s opinion. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as to the impact of the Transaction on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters.

Centerview’s opinion expressed no view as to, and did not address, the Company’s underlying business decision to proceed with or effect the Transaction, or the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available to the Company or in which the Company might engage. Centerview’s opinion was limited to and addressed only the fairness, from a financial point of view, as of the date of Centerview’s written opinion, to the holders of Sanderson Farms common stock (other than Excluded Shares) of the Merger Consideration to be paid to such holders pursuant to the Merger Agreement. For purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or aspect of the Merger Agreement or the Transaction, including, without limitation, the structure or form of the Transaction, or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or any other term or aspect of the Transaction to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, creditors or other constituencies of the Company or any other party. In addition, Centerview expressed no view or opinion as to the fairness (financial or otherwise) of the amount, nature or any

 

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other aspect of any compensation to be paid or payable to any of the officers, directors or employees of the Company or any party, or class of such persons in connection with the Transaction, whether relative to the Merger Consideration to be paid to the holders of Sanderson Farms common stock (other than Excluded Shares) pursuant to the Merger Agreement or otherwise. Centerview’s opinion was necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to Centerview as of, the date of Centerview’s written opinion, and Centerview does not have any obligation or responsibility to update, revise or reaffirm its opinion based on circumstances, developments or events occurring after the date of Centerview’ written opinion. Centerview’s opinion does not constitute a recommendation to any stockholder of the Company or any other person as to how such stockholder or other person should vote with respect to the Merger or otherwise act with respect to the Transaction or any other matter. Centerview’s financial advisory services and its written opinion were provided for the information and assistance of the Board of Directors (in their capacity as directors and not in any other capacity) in connection with and for purposes of its consideration of the Transaction. The issuance of Centerview’s opinion was approved by the Centerview Partners LLC Fairness Opinion Committee.

Summary of Centerview Financial Analysis

The following is a summary of the material financial analyses prepared and reviewed with the Board of Directors in connection with Centerview’s opinion, dated August 8, 2021. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Centerview may have deemed various assumptions more or less probable than other assumptions, so the reference ranges resulting from any particular portion of the analyses summarized below should not be taken to be Centerview’s view of the actual value of the Company. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Centerview. Considering the data in the tables below without considering all financial analyses or factors or the full narrative description of such analyses or factors, including the methodologies and assumptions underlying such analyses or factors, could create a misleading or incomplete view of the processes underlying Centerview’s financial analyses and its opinion. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the Transaction. None of the Company, Parent, Merger Sub, Wayne Farms or Centerview or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the Company do not purport to be appraisals or reflect the prices at which the Company may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before August 6, 2021, and is not necessarily indicative of current market conditions.

Selected Public Company Analysis

Centerview reviewed certain financial information relating to the Company and compared it to corresponding financial information of certain publicly traded companies that Centerview selected based on its experience and professional judgment.

Although neither of the selected companies is directly comparable to the Company, the companies listed below were chosen by Centerview, among other reasons, because they are publicly traded companies that are vertically-integrated poultry producers, although both also compete in other lines of business. The financial data that was used with respect to these selected companies was based on the selected companies’ SEC filings and other data sources as of August 6, 2021.

 

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However, because neither of the selected companies is exactly the same as the Company, Centerview believed it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected public company analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the operational, business and/or financial characteristics of the Company and the selected companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis.

In performing this analysis, Centerview calculated, for each of the selected companies, the company’s enterprise value (referred to as EV) (calculated as the equity value (determined using the treasury stock method and taking into account outstanding in-the-money options and other equity awards and convertible securities, as applicable) plus the face value of debt and certain liabilities less cash and cash equivalents and certain other investments), as a multiple of consensus estimates (drawn from FactSet, a data source containing historical and estimated financial data) of such selected company’s estimated EBITDA for the years 2021 and 2022, in each case conformed to the Company’s fiscal year ending October 31 using annual time weighting. Based on its experience and professional judgment and taking into account the Company’s higher earnings volatility relative to the selected companies and the Company’s historical discount to the median EV/NTM (next twelve month) EBITDA of the selected companies during periods of elevated profitability, Centerview applied a downward adjustment of 25% to the median EV/EBITDA multiples for the selected companies. The selected companies and the results of this analysis are summarized as follows:

 

Selected Companies		EV / FY2021E EBITDA				EV / FY2022E EBITDA
Pilgrim’s Pride Corporation			6.0x				5.6x
Tyson Foods, Inc.			7.6x				7.4x
Peer Median			6.8x				6.5x
Peer Median with a 25% Discount			5.1x				4.9x

Based on its experience and professional judgment, for purposes of its analysis Centerview selected an enterprise value to estimated fiscal year 2021 EBITDA multiple reference range of 5.5x to 7.0x and an enterprise value to estimated fiscal year 2022 EBITDA multiple reference range of 5.0x to 6.5x. In selecting these reference ranges, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected comparable companies that could affect their public trading values in order to provide a context in which to consider the results of the quantitative analysis.

With respect to the fiscal year 2021 analysis, Centerview applied the EBITDA multiple reference range to the Company’s estimated fiscal year 2021 EBITDA of $626 million, as set forth in the Forecasts, to derive a range of implied enterprise values for the Company. Centerview added to each of these ranges of implied enterprise values the Company’s estimated net cash at July 31, 2021 as set forth in the Internal Data to derive a range of implied equity values for the Company. Centerview then divided these implied equity values by the number of shares of Sanderson Farms common stock outstanding as of July 31, 2021 (on a fully diluted basis but excluding the Company Performance Share Awards (as defined in the Merger Agreement)) as set forth in the Internal Data, which resulted in a range of implied values per share of Sanderson Farms common stock of $163 to $205 (rounded to the nearest $1.00). Centerview then compared the results of the above analysis to the Merger Consideration of $203 per share of Sanderson Farms common stock in cash, without interest, to be paid to the holders of Sanderson Farms common stock (other than Excluded Shares) pursuant to the Merger Agreement.

With respect to the fiscal year 2022 analysis, Centerview applied the EBITDA multiple reference range to the Company’s estimated fiscal year 2022 EBITDA of $653 million, as set forth in the Forecasts, to derive a range of implied enterprise values for the Company. Centerview added to each of these ranges of implied enterprise values the Company’s estimated net cash at July 31, 2021 as set forth in the Internal Data to derive a range of implied equity values for the Company. Centerview then divided these implied equity values by the number of shares of Sanderson Farms common stock outstanding as of July 31, 2021 (on a fully diluted basis but excluding the Company Performance Share Awards) as set forth in the Internal Data, which resulted in a range of

 

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implied values per share of Sanderson Farms common stock of $155 to $199 (rounded to the nearest $1.00). Centerview then compared the results of the above analysis to the Merger Consideration of $203 per share of Sanderson Farms common stock in cash, without interest, to be paid to the holders of Sanderson Farms common stock (other than Excluded Shares) pursuant to the Merger Agreement.

Selected Precedent Transactions Analysis

Centerview reviewed and compared certain information relating to the following selected transactions that Centerview, based on its professional judgment and experience, deemed relevant to consider in relation to the Company and the Transaction.

However, because no company or transaction used in this analysis is identical or directly comparable to the Company or the Transaction, Centerview believed it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected precedent transaction analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and professional judgment, concerning differences between the operational, business, financial and/or cyclical characteristics of the Company and each selected target company as well as the Transaction and the selected transactions that could affect the transaction values of each in order to provide a context in which to consider the results of the quantitative analysis. Although none of the selected transactions is directly comparable to the Transaction, the transactions listed below were chosen by Centerview because, among other reasons, their business characteristics, end-market focus, size and/or other factors, for purposes of Centerview’s analysis, may be considered similar to the Transaction. Centerview used its experience, expertise and knowledge of these industries to select transactions that involved companies with certain operational, business and/or financial characteristics that, for purposes of this analysis, may be considered similar to certain characteristics of the Company. The reasons for and the circumstances surrounding each of the selected transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the companies included in the selected transactions analysis.

The selected precedent transactions considered in this analysis are summarized as follows:

 

Announcement Date		Target		Acquiror		EV / LTM EBITDA
August 20, 2018		Keystone Foods LLC		Tyson Foods, Inc.			10.2x
April 9, 2018		National Beef Packing Company, LLC		Marfrig S.A.			4.4x
September 11, 2017		Moy Park Holdings (Europe) Ltd.		Pilgrim’s Pride Corporation			9.8x
July 1, 2015		Cargill Pork, LLC		JBS USA, LLC			6.8x	(1)
June 21, 2015		Moy Park Ltd.		JBS S.A.			7.9x	(2)
November 21, 2014		P&M Quality Smallgoods Pty Ltd.		JBS Australia Pty Ltd.			9.7x
December 23, 2013		Campofrio Food Group S.A.		Sigma Alimentos S.A. de CV and Smithfield Foods, Inc.			8.4x	(3)
May 29, 2013		Smithfield Foods, Inc.		Shuanghui International Holdings Limited			9.3x
September 16, 2009		Pilgrim’s Pride Corporation		JBS USA Holdings, Incorporated			10.7x
September 16, 2009		Bertin Ltda.		JBS S.A.			12.3x

 

 

(1)	Based on JBS-disclosed EBITDA derived from the 5-year average margin of JBS USA Pork, as set forth in transaction announcement.

(2)	Based on estimated 2015 EBITDA.

(3)	Based on revised offer of €6.90 per share as of December 23, 2013. Multiple based on the last 12-month EBITDA as reported, equivalent to a 7.8x multiple based on normalized EBITDA as defined by Campofrio Food Group SA.

 

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Using publicly available information obtained from SEC filings and other data sources as of August 6, 2021, Centerview calculated, for each selected transaction, the enterprise value implied for the applicable target company based on the consideration payable in the applicable selected transactions as a multiple of the target company’s EBITDA for the last 12-month period, or closest comparable disclosed metric, which Centerview refers to as LTM (unless otherwise noted), for which financial information had been made public at the time of the announcement of such transactions.

 

		EV/ LTM EBITDA
Median			9.5x
Mean			8.9x

Based on its analysis of the relevant metrics for each of the selected precedent transactions and other considerations that Centerview deemed relevant in its professional judgment and experience, Centerview selected a multiple reference range of enterprise value to estimated 10-year Normalized EBITDA of 8.5x to 10.5x. “Normalized EBITDA” is defined for this purpose as the average EBITDA per pound over the most recent trailing 10 fiscal years, up to and including the estimated and unreported value for fiscal year 2021 (as reported in the Forecasts), multiplied by the estimated and unreported pounds sold in fiscal year 2021 (as reported in the Forecasts). Normalized EBITDA is a non-GAAP measure and is intended to provide supplemental performance information and present multiples in the view of the cyclicality and earnings volatility of the protein producing industries. In light of both the Company’s volatility in LTM EBITDA and the range of periods in the business cycle at which the selected transactions in the transaction analysis were executed, Centerview felt it was more appropriate to apply the Normalized EBITDA metric, rather than LTM EBITDA, as Normalized EBITDA better measures the Company’s average profitability through business cycles.

In selecting the enterprise value to estimated 10-year Normalized EBITDA multiple reference range of 8.5x to 10.5x, Centerview made qualitative judgments based on its experience and professional judgment concerning differences between the business, financial and operating characteristics and prospects of the Company and the target companies included in the selected transactions and other factors that could affect the public trading, acquisition or other values of such companies or the Company in order to provide a context in which to consider the results of the quantitative analysis. Centerview then applied this reference range to the Company’s Normalized EBITDA (the calculation of which included the estimated 2021 EBITDA, as set forth in the Forecasts) of $418 million. Centerview added to this range of implied enterprise values the Company’s estimated net cash at July 31, 2021 as set forth in the Internal Data to derive a range of implied equity values for the Company. Centerview then divided this range of implied equity values by the number of shares of Sanderson Farms common stock outstanding as of July 31, 2021 (on a fully diluted basis but excluding the Company Performance Share Awards) as set forth in the Internal Data, which resulted in a range of implied values per share of Sanderson Farms common stock of $168 to $206, rounded to the nearest $1.00. Centerview then compared this range to the Merger Consideration of $203 per share of Sanderson Farms common stock in cash, without interest, to be paid to the holders of Sanderson Farms common stock (other than Excluded Shares) pursuant to the Merger Agreement.

Discounted Cash Flow Analysis

Centerview performed a discounted cash flow analysis of the Company based on the Forecasts and certain internal financial analyses and forecasts of unlevered free cash flows of the Company set forth under the section of the proxy statement entitled “—Management Projections.” A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset or set of assets by calculating the “present value” of estimated future cash flows of the asset or set of assets. “Present value” refers to the current value of future cash flows and is obtained by discounting those future cash flows by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.

 

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In performing this analysis, Centerview calculated a range of implied equity values for the Company’s shares of Sanderson Farms common stock by (a) discounting to present value, as of July 31, 2021, using discount rates ranging from 7.5% to 8.5% (reflecting Centerview’s analysis of the Company’s weighted average cost of capital) and the mid-year convention: (i) the forecasted unlevered free cash flows of the Company over the period beginning August 1, 2021 and ending October 31, 2025 as set forth in the Forecasts and (ii) a range of implied terminal enterprise values of the Company, calculated by Centerview using perpetuity growth rates of 1.0% to 2.0% (reflecting Centerview’s professional judgement of the Company’s potential long-term cash flow growth rate) which implied a range of EBITDA multiples of 6.7x to 9.1x based on the Company’s forecasted terminal year EBITDA and (b) adding to the foregoing results the Company’s estimated net cash at July 31, 2021, as set forth in the Internal Data. Centerview then divided these implied equity values by the number of shares of Sanderson Farms common stock outstanding as of July 31, 2021 (on a fully diluted basis but excluding the Company Performance Share Awards) as set forth in the Internal Data, which resulted in a range of implied values per share of Sanderson Farms common stock of $170 to $215, rounded to the nearest $1.00. Centerview then compared the results of the above analysis to the Merger Consideration of $203 per share of Sanderson Farms common stock in cash, without interest, to be paid to the holders of Sanderson Farms common stock (other than Excluded Shares) pursuant to the Merger Agreement.

Other Factors

Centerview noted for the Board of Directors certain additional factors solely for informational purposes, including, among other things, the following:

 

•

Historical Stock Price Trading Analysis. Centerview reviewed historical closing trading prices of the shares of Sanderson Farms common stock during the 52-week period ended June 18, 2021 (the last trading day before the Wall Street Journal reported on June 21, 2021 that the Company was exploring a sale), which reflected low and high closing prices for the shares of Sanderson Farms common stock during such period of $110 and $175 per share.

 

•

Analyst Price Target Analysis. Centerview reviewed stock price targets for the shares of Sanderson Farms common stock in publicly available Wall Street research analyst reports as of June 18, 2021 (the last trading day before the Wall Street Journal reported on June 21, 2021 that the Company was exploring a sale), which indicated low and high stock price targets for the shares of Sanderson Farms common stock ranging from $157 per share to $195 per share.

General

The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its determination as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses.

Centerview’s financial analyses and opinion were only one of many factors taken into consideration by the Board of Directors in its evaluation of the Transaction. Consequently, the analyses described above should not be viewed as determinative of the views of the Board of Directors or management of the Company with respect to the Merger Consideration or as to whether the Board of Directors would have been willing to determine that a different consideration was fair. The consideration for the Transaction was determined through arm’s-length negotiations between the Company and Parent and was approved by the Board of Directors. Centerview provided advice to the Company during these negotiations. Centerview did not, however, recommend any specific amount of consideration to the Company or the Board of Directors or recommend that any specific amount of consideration constituted the only appropriate consideration for the Transaction.

Centerview is a securities firm engaged directly and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. In the two years prior to the date of its written opinion Centerview provided general financial advisory services to the Company, and Centerview

 

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received approximately $1,500,000 in compensation from the Company during such period. In the two years prior to the date of its written opinion, Centerview was not engaged to provide financial advisory or other services to Parent, Merger Sub, Wayne Farms or Cargill, an affiliate of Parent, and Centerview did not receive any compensation from Parent, Merger Sub, Wayne Farms or Cargill during such period. In the two years prior to the date of its written opinion, Centerview was engaged to provide financial advisory or other services unrelated to the Company to CGC, the indirect majority owner of Wayne Farms, in connection with certain internal matters, and Centerview received less than $1,000,000 in compensation from CGC for such services. Centerview may provide financial advisory and other services to or with respect to the Company, Parent, Wayne Farms, Cargill, CGC or their respective affiliates in the future, for which Centerview may receive compensation. Certain (i) of Centerview and its affiliates’ directors, officers, members and employees, or family members of such persons, (ii) of Centerview’s affiliates or related investment funds and (iii) investment funds or other persons in which any of the foregoing may have financial interests or with which they may co-invest, may at any time acquire, hold, sell or trade, in debt, equity and other securities or financial instruments (including derivatives, bank loans or other obligations) of, or investments in, the Company, Parent, Wayne Farms, Cargill, CGC or any of their respective affiliates, or any other party that may be involved in the Transaction.

The Board of Directors selected Centerview as its financial advisor in connection with the Transaction based on Centerview’s reputation and experience and the Board of Director’s longstanding working relationship with certain principals at Centerview. Centerview is an internationally recognized investment banking firm that has substantial experience in transactions similar to the Transaction.

In connection with Centerview’s services as the financial advisor to the Board of Directors, the Company has agreed to pay Centerview an aggregate fee of $50,000,000, $5,000,000 of which was payable upon the rendering of Centerview’s opinion and the remainder of which is payable contingent upon consummation of the Transaction. In addition, the Company has agreed to reimburse certain of Centerview’s expenses arising, and to indemnify Centerview against certain liabilities that may arise, out of Centerview’s engagement.

Management Projections

Except for a financial outlook with respect to the current fiscal quarter and year issued in connection with its ordinary course earnings announcements, Sanderson Farms does not, as a matter of course, publicly disclose forecasts or projections as to future performance, earnings or other results due to the inherent unpredictability of the underlying assumptions, estimates and projections, especially over the longer term periods. However, Sanderson Farms is including a summary of certain previously nonpublic, unaudited prospective financial information prepared by its management for the fiscal years ending October 31, 2021 through October 31, 2025 (the “Management Projections”) in order to provide Sanderson Farms Stockholders with access to information that was made available to, and approved by, the Board of Directors in connection with its evaluation of the Merger and the Merger Consideration. Selected line items from the Management Projections for fiscal years ended October 31, 2021 and October 31, 2022 were also made available to Parent and Merger Sub in connection with their due diligence review, and the Management Projections were made available to Centerview in connection with the rendering of its opinion to the Board of Directors.

The following table presents a summary of the Management Projections.

 

(In millions)
		2021E				2022E				2023E				2024E				2025E
Net Sales		$	4,571			$	4,528			$	4,461			$	4,467			$	4,742
EBITDA(1)		$	626			$	653			$	644			$	477			$	503
NOPAT(2)		$	347			$	361			$	348			$	206			$	216
Unlevered Free Cash Flow(3)		$	360			$	350			$	157			$	125			$	255

 

 

(1)	Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP financial measure which was calculated in the Management Projections as net sales, less cost of sales, less selling, general and administrative expenses (“SG&A”), plus depreciation and amortization (“D&A”).

 

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(2)	Net operating profit after tax (“NOPAT”) is a non-GAAP financial measure which was calculated in the Management Projections as (i) EBITDA less D&A times (ii) one minus the tax rate which was assumed to be 24% for the fiscal year ended October 31, 2021 and 24.5% for subsequent fiscal years.

(3)

“Unlevered Free Cash Flow” is a non-GAAP financial measure which was calculated by Centerview in connection with its discounted cash flow analysis, using the financial information provided by Sanderson Farms in the Management Projections, as NOPAT (as shown in the table above) plus (i) D&A, less (ii) capital expenditures, less (iii) the increase in net working capital.

Important Information Regarding the Management Projections

The Management Projections were developed by Sanderson Farms management on a standalone basis without giving effect to the Merger and the other transactions contemplated by the Merger Agreement. Furthermore, the Management Projections do not take into account the effect of any failure of the transactions contemplated by the Merger Agreement to be completed and should not be viewed as accurate or continuing in that context. Although the Management Projections are presented with numerical specificity, they were based on numerous variables and assumptions made by Sanderson Farms management with respect to industry performance, general business, economic, regulatory, market and financial conditions and other future events, as well as matters specific to Sanderson Farms’ business, all of which are difficult or impossible to predict accurately and many of which are beyond Sanderson Farms’ control. The Management Projections constitute forward-looking information and are subject to many risks and uncertainties that could cause actual results to differ materially from the results forecasted in the Management Projections, including, but not limited to, Sanderson Farms’ performance, industry performance, general business and economic conditions, customer requirements, staffing levels, competition, adverse changes in applicable laws, regulations or rules, the ability to successfully pursue and complete acquisitions, and the various risks set forth in Sanderson Farms’ reports filed with the SEC. There can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than the Management Projections. The Management Projections cover several years, and such information by its nature becomes less reliable with each successive year. In addition, the Management Projections will be affected by Sanderson Farms’ ability to achieve strategic goals, objectives and targets over the applicable periods. The Management Projections reflect assumptions as to certain business decisions that are subject to change and cannot, therefore, be considered a guarantee of future operating results, and this information should not be relied on as such. The inclusion of the Management Projections should not be regarded as an indication that Sanderson Farms, Centerview, their respective officers, directors, affiliates, advisors, or other representatives or anyone who received this information then considered, or now considers, them a reliable prediction of future events, and this information should not be relied upon as such. The inclusion of the Management Projections in this proxy statement should not be regarded as an indication that the Management Projections will be necessarily predictive of actual future events. No representation is made by Sanderson Farms or any other person regarding the Management Projections or Sanderson Farms’ ultimate performance compared to such information. The Management Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information about Sanderson Farms contained in Sanderson Farms’ public filings with the SEC. For more information, please see the section of this proxy statement captioned “Where You Can Find More Information.” In light of the foregoing factors, and the uncertainties inherent in the Management Projections, stockholders are cautioned not to place undue, if any, reliance on the Management Projections.

The Management Projections were not prepared with a view toward public disclosure or with a view toward complying with the published guidelines of the SEC regarding projections or accounting principles generally accepted in the United States (“GAAP”), or the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. Neither Sanderson Farms’ independent auditor nor any other independent accountant has compiled, examined or performed any procedures with respect to the Management Projections, nor have they expressed any opinion or any other form of assurance on such information or its achievability.

 

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EBITDA, NOPAT and Unlevered Free Cash Flow contained in the Management Projections summarized above are “non-GAAP financial measures,” which are financial performance measures that are not calculated in accordance with GAAP. The non-GAAP financial measures used in the Management Projections were relied upon by Centerview for purposes of its opinion and by the Board of Directors in connection with its evaluation of the Merger. The SEC rules which would otherwise require a reconciliation of a non-GAAP financial measure to a GAAP financial measure do not apply to non-GAAP financial measures included in disclosures relating to a proposed business combination such as the Merger if the disclosure is included in a document such as this proxy statement. In addition, reconciliations of non-GAAP financial measures were not relied upon by Centerview for purposes of its opinion or by the Board of Directors in connection with its evaluation of the Merger. Accordingly, Sanderson Farms has not provided a reconciliation of the financial measures included in the Management Projections to the relevant GAAP financial measures. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Sanderson Farms may not be comparable to similarly titled amounts used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, these non- GAAP financial measures should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.

The summary of such information above is included solely to give stockholders access to the information that was made available to the Board of Directors, Centerview, Parent and Merger Sub, and is not included in this proxy statement in order to influence any stockholder to make any investment decision with respect to the Merger. In addition, the Management Projections have not been updated or revised to reflect information or results after the date they were prepared or as of the date of this proxy statement, and except as required by applicable securities laws, Sanderson Farms does not intend to update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the underlying assumptions are shown to be in error.

Interests of Sanderson Farms’ Directors and Executive Officers in the Merger

The directors and executive officers of Sanderson Farms have certain interests in the Merger that may be different from, or in addition to, the interests of stockholders of Sanderson Farms generally. The members of the Board of Directors were aware of, and considered, these interests, among other matters, in evaluating and negotiating the Merger Agreement and the Merger, and in recommending that the stockholders of Sanderson Farms adopt the Merger Agreement. Sanderson Farms’ stockholders should take these interests into account in deciding whether to vote “FOR” the Sanderson Farms Merger proposal. These interests are described in more detail below, and certain of them are quantified within the narrative disclosure and in the section of this proxy statement entitled “—Quantification of Potential Payments and Benefits to Sanderson Farms’ Named Executive Officers in Connection with the Merger” below. The Merger will constitute a “change in control” for purposes of the compensation arrangements described below.

For purposes of this disclosure the Sanderson Farms executive officers include:

 

•

Joe F. Sanderson, Jr., Chairman of the Board and Chief Executive Officer

 

•

Lampkin Butts, President and Chief Operating Officer

 

•

Mike Cockrell, Treasurer, Chief Financial Officer, and Chief Legal Officer

 

•

Tim Rigney, Secretary and Controller

Certain Assumptions

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

 

•

the relevant price per share of Sanderson Farms common stock is the Merger Consideration of $203.00 per share of Sanderson Farms common stock in cash, without interest;

 

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•

the Merger occurs on December 31, 2021, which is the assumed completion date of the Merger solely for purposes of the disclosure in this section; and

 

•

the employment of each executive officer of Sanderson Farms is terminated without cause or for good reason (each, a “qualifying termination”) on December 31, 2021, immediately following the completion of the Merger.

As a result of these assumptions, the actual amounts, if any, to be received by Sanderson Farms’ executive officers and non-employee directors may differ materially from the amounts set forth in this section. For purposes of the discussion in this section, “single trigger” refers to benefits that arise solely as a result of the completion of the Merger and “double trigger” refers to benefits that require two conditions, which are the completion of the Merger and either the completion of a subsequent, time-based vesting period or a qualifying termination of employment on or following the Effective Time.

Treatment of Sanderson Farms Equity Awards

Company Restricted Shares. Each share of Sanderson Farms restricted stock that is outstanding immediately prior to the Effective Time (other than any such shares of Sanderson Farms restricted stock granted to employees on or following August 8, 2021) will be fully vested and converted into the right to receive an amount in cash equal to the Merger Consideration, which will be paid no later than the fifth Business Day following the Effective Time. The levels, participants, terms and treatment of any shares of Sanderson Farms restricted stock granted to employees on or following August 8, 2021 will be agreed between Sanderson Farms and Parent.

Company Performance Share Awards for Individuals Other Than Messrs. Sanderson, Butts and Cockrell. For each performance share award that is outstanding immediately prior to the Effective Time (including those held by Mr. Rigney):

 

•

each share of Sanderson Farms common stock covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during the applicable performance period as of the Effective Time) will be converted into the right to receive the Merger Consideration, which will be paid within five Business Days following the Effective Time, and

 

•

the excess of the maximum number of shares of Sanderson Farms common stock covered by the award over the earned shares of Sanderson Farms common stock covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during the applicable performance period as of the Effective Time) will convert into an unvested cash award that will vest on the first anniversary of the closing date or upon an earlier qualifying termination of employment and be paid within five Business Days following the vesting date (but no later than the first anniversary of the closing date of the Merger), subject to continued employment through such vesting date.

Company Performance Share Awards for Messrs. Sanderson, Butts and Cockrell. At the Effective Time of the Merger, each outstanding performance share award held by each of Messrs. Sanderson, Butts and Cockrell will vest and be earned at the maximum level of performance, meaning 200% of the target number of shares covered by the awards (such maximum number of shares is equal to 76,500, 21,000 and 16,500, respectively), and each earned share will be converted into a right to receive an amount in cash equal to the Merger Consideration, which amount will be payable no later than the fifth Business Day following the Effective Time.

See the section of this proxy statement entitled “—Quantification of Potential Payments and Benefits to Sanderson Farms’ Named Executive Officers in Connection with the Merger” for the estimated value of unvested equity awards held by Sanderson Farms’ named executive officers.

 

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Severance

Executive Employment Agreements

Sanderson Farms entered into an employment agreement with each of Messrs. Sanderson, Butts and Cockrell in 2009. The agreements were superseded by new agreements in 2015, and the new agreements were amended on August 8, 2021 in connection with the Merger. The agreements provide for a lump sum severance payment to be paid to such officer if, (i) before a change in control of Sanderson Farms, such officer is terminated without “cause,” except in the case of poor performance; or (ii) at or after a change in control, such officer is terminated without “cause”; or (iii) such officer resigns for “good reason” (each, a “qualifying termination”).

The employment agreements provide for the following severance in the event of a qualifying termination:

 

•

in the case of Mr. Sanderson, three times, and in the case of Messrs. Butts and Cockrell, two times the sum of (i) the officer’s annual base salary for fiscal year 2021, plus (ii) 50% of the maximum bonus available to the officer under the Sanderson Farms bonus program in effect for fiscal year 2021 (the “Bonus Amount”);

 

•

a pro-rata bonus for the year in which employment termination occurs equal to the Bonus Amount, prorated based on the number of days elapsed from the beginning of the fiscal year in which the officer’s employment terminates; and

 

•

the continuation of medical benefits that the officer would otherwise be eligible to receive for 24 months or, if earlier, until the time the officer becomes eligible for substantially similar benefits from a subsequent employer.

The severance payments are payable in a lump sum as soon as practicable following the officer’s qualifying termination. Each employment agreement includes a (i) confidentiality and mutual non-disparagement covenant in perpetuity, (ii) two-year post-termination non-compete and (iii) two-year post-termination non-solicitation of customers and employees. The severance payments are conditioned upon the officer signing (and not revoking) a release of claims in favor of Sanderson Farms and complying with applicable restrictive covenants.

Sanderson Farms Severance Plan

On August 8, 2021, Sanderson Farms adopted a severance plan that will take effect upon a change of control of Sanderson Farms, including completion of the Merger. Under the plan, each regular, full-time salaried employee of Sanderson Farms as of the date immediately preceding a change in control (excluding any employees who are (i) classified as temporary or seasonal employees or (ii) covered by another plan, employment agreement or arrangement that provides service benefits upon or in connection with a change of control (which includes Messrs. Sanderson, Butts and Cockrell)), including Mr. Rigney, will be entitled to a lump sum payment upon a qualifying termination of employment, with such payment based on the employee’s years of service with Sanderson Farms. A qualifying termination for purposes of the severance plan means a termination of employment that occurs upon a change of control or during the nine months following the change in control, in each case, either by Sanderson Farms without “cause” or by the employee for “good reason.”

Upon a qualifying termination, eligible employees (including Mr. Rigney) will be entitled to a lump sum severance payment consisting of two weeks of salary for each completed and partial year of service with Sanderson Farms, with a minimum of 13 weeks and a maximum of 52 weeks. An employee will not be entitled to receive any such severance payment unless the employee has signed and not revoked a release of claims in favor of Sanderson Farms.

Quantification of Severance

See the section of this proxy statement entitled “—Quantification of Potential Payments and Benefits to Sanderson Farms’ Named Executive Officers in Connection with the Merger” for the estimated value of severance payments in the event of a qualifying termination.

 

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Fiscal Year 2022 Cash Bonuses

If the Effective Time occurs on or after November 1, 2021, Sanderson Farms employees employed as of the Effective Time shall receive fiscal year 2022 bonuses calculated at the target performance level and pro-rated for the portion of the fiscal year that has elapsed through the later of the Effective Time and April 1, 2022. See the section of this proxy statement entitled “—Quantification of Potential Payments and Benefits to Sanderson Farms’ Named Executive Officers in Connection with the Merger” for the estimated value of 2022 annual cash bonus payments to the named executive officers.

Transaction Bonus

Mr. Rigney is eligible to receive a cash transaction bonus conditioned upon the successful completion of the Merger. The aggregate amount of Mr. Rigney’s bonus is equal to $174,972. Fifty percent of the bonus will vest and be payable immediately before the Effective Time, and the remaining 50% will vest and be payable upon the one-year anniversary of the Effective Time, in each case, subject to Mr. Rigney’s continued employment through the applicable vesting date; provided that, in the event Mr. Rigney experiences a qualifying termination prior to the first-year anniversary of the Effective Time, the unvested portion of the transaction bonus will vest and become payable upon the date of such qualifying termination.

Other New Employment and Compensation Arrangements After the Merger

Any executive officers who are retained to provide services to the combined company may enter into new individualized compensation arrangements and may participate in cash or equity incentive or other benefit plans maintained by the combined company. As of the date of this proxy statement, no new individualized compensation arrangements for such persons have been established.

Indemnification and Insurance

Under the Merger Agreement, certain indemnification and insurance rights exist in favor of Sanderson Farms’ current and former directors and officers, and certain current and former employees. See “Proposal 1: Approval of the Merger Agreement—Indemnification and Insurance” for information about these rights.

Quantification of Potential Payments and Benefits to Sanderson Farms’ Named Executive Officers in Connection with the Merger

The information set forth in the table below is intended to comply with Item 402(t) of the SEC’s Regulation S-K, which requires disclosure of information about certain compensation for each named executive officer of Sanderson Farms that is based on, or otherwise relates to, the Merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and is subject to a non-binding advisory vote of the stockholders of Sanderson Farms.

Except as otherwise specifically noted, for purposes of quantifying the potential payments and benefits described in this section, the following assumptions were used:

 

•

the relevant price per share of Sanderson Farms common stock is the Merger Consideration of $203 per share of Sanderson Farms common stock in cash, without interest;

 

•

the Merger occurs on December 31, 2021, which is the assumed completion date of the Merger solely for purposes of the disclosure in this section; and

 

•

each executive officer of Sanderson Farms experiences a qualifying termination on December 31, 2021 immediately following the completion of the Merger.

 

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As a result of these assumptions and the assumptions included in the footnotes below, the actual amounts, if any, to be received by Sanderson Farms’ named executive officers may differ materially from the amounts set forth in the table below. The amounts below do not reflect certain compensation actions that may occur after the date hereof and before completion of the Merger. The calculations in the table below do not include amounts the Sanderson Farms named executive officers were already entitled to receive or vested in as of the date hereof. In addition, these amounts do not attempt to forecast any additional equity or cash award grants, issuances or forfeitures that may occur, prior to the Effective Time, except as discussed in the narrative above.

 

Named Executive Officer		Cash ($)(1)				Equity ($)(2)				Other ($)(3)				Total ($)
Joe F. Sanderson, Jr.			10,101,627				28,064,750				20,764				38,187,141
Lampkin Butts			3,138,254				7,663,250				20,764				10,822,268
Mike Cockrell			2,516,177				6,039,250				20,764				8,576,191
Tim Rigney			592,963				1,451,450				—				2,044,413

 

(1)

Cash. Consists of a prorated fiscal year 2022 cash bonus payable on a single-trigger basis and (1) for Messrs. Sanderson, Butts and Cockrell, a cash severance payment under their respective executive employment agreements and (2) for Mr. Rigney, a cash severance payment under the Sanderson Farms severance plan and a cash transaction bonus. For each officer, severance payments are payable in a lump sum and become payable only upon a qualifying termination (i.e., double trigger) under the executive employment agreements or severance plan, as applicable, on or following the completion of the Merger (see the section of this proxy statement entitled “—Severance”). Half of the transaction bonus payable to Mr. Rigney, or $87,486, is a “single-trigger” payment and the other half is a “double-trigger” payment (see the section of this proxy statement entitled “—Management Transaction Bonus”). Each employment agreement provides that the receipt of the severance thereunder is subject to compliance with a (i) confidentiality and mutual non-disparagement covenant in perpetuity, (ii) two-year post-termination non-compete and (iii) two-year post-termination non-solicitation of customers and employees. The estimated amount of each such payment is shown in the following table:

 

Named Executive Officer		Severance ($)				Annual Bonus ($)				Transaction Bonus ($)				Total ($)
Joe F. Sanderson, Jr.			9,363,543				738,084				—				10,101,627
Lampkin Butts			2,842,211				296,043				—				3,138,254
Mike Cockrell			2,294,201				221,976				—				2,516,177
Tim Rigney			349,944				68,047				174,972				592,963

 

(2)

Equity. Amounts shown reflect the estimated value to be received by the Sanderson Farms named executive officers in respect of unvested Sanderson Farms restricted share awards and unvested Sanderson Farms performance share awards upon a qualifying termination of employment (as more fully described under “—Treatment of Sanderson Farms Equity Awards”). The estimated value of each such award is shown in the following table. Values shown reflect intrinsic value as of the assumed Effective Time of December 31, 2021 based on the assumed price per share of Sanderson Farms common stock of $203.00. The restricted share awards of each named executive officer and the performance share awards of Messrs. Sanderson, Butts and Cockrell vest on a “single trigger” basis. Of Mr. Rigney’s performance share awards, based on fiscal 2021 financial projections, approximately $430,360 will vest on a “single trigger” basis and $412,090 will vest on a “double trigger” basis.

 

Named Executive Officer		Sanderson Farms Restricted Stock Awards ($)				Sanderson Farms Performance Share Awards ($)				Total ($)
Joe F. Sanderson, Jr.			12,535,250				15,529,500				28,064,750
Lampkin Butts			3,400,250				4,263,000				7,663,250
Mike Cockrell			2,689,750				3,349,500				6,039,250
Tim Rigney			609,000				842,450				1,451,450

 

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(3)	Other. Consists of 24 months of continued medical benefits that the officer would otherwise be eligible to receive as an active employee of Sanderson Farms for Messrs. Sanderson, Butts and Cockrell. This is a “double-trigger” benefit.

Interests of Sanderson Farms’ Directors in Connection with the Merger

The value of the restricted share awards held by non-employee directors that will vest upon completion of the Merger on December 31, 2021 is $6,148,464.

Financing of the Merger

We anticipate that the total funds needed to complete the Merger (including the funds to pay the Sanderson Farms Stockholders the amounts due to them under the Merger Agreement), would be approximately $4.53 billion, which will be funded through a combination of the following:

 

•

debt financing commitments made to Borrower by the debt financing sources under the debt commitment letter in the aggregate of up to $2,500 million, consisting of a $1,000 million senior secured term loan A-1 facility, a $750 million senior secured term loan A-2 facility, and a $750 million senior secured term loan B facility; additionally a $750 million senior secured revolving credit facility shall be available for the Borrower on or after the closing of the Merger; and

 

•

an equity financing commitment made to Parent by CMSC under the Investment Agreement.

Debt Financing

In connection with the entry into the Merger Agreement, the Borrower has obtained a debt commitment letter from Bank of America, N.A., BofA Securities, Inc. and Coöperatieve Rabobank U.A. to provide debt financing upon the terms and subject to the conditions set forth in the debt commitment letter in the aggregate amount of up to $3,250 million, consisting of a $1,000 million senior secured term loan A-1 facility, a $750 million senior secured term loan A-2 facility, a $750 million senior secured term loan B facility and a $750 million senior secured revolving credit facility (collectively, the “debt facilities”; the financing available under the debt facilities, the “debt financing”). It is expected that $2,500 million of the debt financing will be needed at the closing of the Merger, consisting of the senior secured term loan A-1, senior secured term loan A-2 and senior secured term loan B facilities. The $750 million senior secured revolving credit facility is not expected to be drawn down at the closing of the Merger but shall be available to the Borrower on and after the closing of the Merger.

The proceeds of the debt financing will be used (i) to finance the consummation of the transactions contemplated by the Merger Agreement on the closing date, including the payment of any amounts required to be paid by Parent pursuant to the Merger Agreement on the closing date, (ii) to repay indebtedness of the Company under its existing credit facilities (the “Closing Refinancing”), (iii) to pay fees and expenses incurred in connection therewith and (iv) subject to a maximum amount to be agreed, to fund working capital and general corporate purposes (including to finance any closing date working capital needs of the Company or its subsidiaries on the closing date). The aggregate principal amount of the debt financing may be increased to fund certain original issue discount or upfront fees in connection with the debt financing.

The obligations of the financing sources under the debt commitment letter to provide the debt financing are subject to a number of limited conditions that are customary for acquisition financing of this type, including, among other things, (i) since August 8, 2021, there shall not have been any Company Material Adverse Effect (as defined in the section of this proxy statement entitled “Proposal 1: Approval of the Merger Agreement—Representations and Warranties”), (ii) the consummation of the Merger in accordance with the Merger Agreement (without giving effect to any amendments, waivers or consents thereof or thereto that are adverse to the interests of the lenders in any material respect without the consent of the lead arrangers), (iii) the

 

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consummation of the equity financing and Wayne Farms contribution, (iv) the consummation of the Closing Refinancing, (v) the delivery of certain audited, unaudited and pro forma financial statements, (vi) the taking of certain limited actions necessary to establish and perfect a security interest in the applicable collateral, subject to certain exceptions, (vii) the receipt of documentation and other information required under applicable “know your customer” and anti-money laundering rules and regulations (including the PATRIOT Act), (viii) the execution and delivery by the borrower and guarantors of definitive documentation with respect to the applicable debt facilities consistent with the debt commitment letter, (ix) the delivery of certain customary closing documents (including a customary solvency certificate), (x) the accuracy of certain limited representations and warranties and (xi) the payment of applicable invoiced fees and expenses. In addition, the financing sources are not obligated to fund the debt financing prior to September 30, 2021.

The obligations of the debt financing sources under the debt commitment letter to provide the debt financing will terminate at 11:59 p.m., New York City time, on May 13, 2022 (or if the End Date under the Merger Agreement is automatically extended in accordance with the terms and conditions thereof, August 15, 2022) or such earlier date on which either the Merger Agreement is validly terminated in accordance with its terms prior to the consummation of the Merger) or the Merger is consummated without the use of such debt financing.

If any portion of the debt financing becomes unavailable on the terms and conditions contemplated by the above mentioned debt commitment letter and the fee letters related thereto, Parent has agreed under the Merger Agreement to use its reasonable best efforts to, as promptly as practicable following the occurrence of such event, obtain alternative financing from the same or alternative sources, (i) on terms and conditions not materially less favorable (taken as a whole) to Parent than those contemplated in the debt commitment letter (taking into account any “market flex” terms) and (ii) in an amount, together with other portions of the financing that remain available to Parent and Merger Sub, sufficient to consummate the transactions contemplated by the Merger Agreement and to pay related fees and expenses; provided that Parent has no obligation to obtain debt financing on terms materially less favorable (taken as a whole) to Parent than the terms (taken as a whole) contained in the original debt commitment letter (including any “market flex” provisions applicable thereto).

As of the last practicable date before the printing of this proxy statement, the debt commitment letter is in effect, and Parent has not notified us of any plans to utilize alternative financing. The documentation governing the debt financing contemplated by the debt commitment letter has not been finalized and, accordingly, the actual terms of the debt financing may differ from those described in this proxy statement.

Equity Financing

Parent is party to that certain Investment Agreement, dated as of August 8, 2021, entered into by and among Holdings, CMSC, Parent and for the purposes of Section 2.1, Section 7.4(f) and Section 11.19 thereof only, each of CGC and Cargill (the “Investment Agreement”). Pursuant to the Investment Agreement, CMSC has committed, on the terms and subject to the conditions set forth in the Investment Agreement, to make an equity contribution to Parent in an aggregate amount, which together with the amounts received pursuant to the debt financing set forth above, will be sufficient to fund all amounts required to be paid or deposited by Parent pursuant to the Merger Agreement and for paying all fees and expenses required to be paid by Parent pursuant to the Merger Agreement (the “equity financing”), and Holdings has committed, on the terms and subject to the conditions set forth in the Investment Agreement, to contribute all of the equity of Wayne Farms to Parent.

Funding of the equity financing is subject to the conditions provided in the Investment Agreement, which include: (i) the conditions to the closing of the Merger under the Merger Agreement having been satisfied (other than those conditions that by their nature are to be satisfied at such closing, but subject to the satisfaction or waiver of such conditions at such closing) and each of Holdings and CMSC having reasonable assurance that the debt financing shall be disbursed and the closing of the Merger shall take place substantially concurrently with, or on the same Business Day (which is similarly defined in the Investment Agreement as defined in this proxy statement) as, the closing of the equity financing, (ii) no law or order issued by any court of competent

 

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jurisdiction or other governmental authority preventing the consummation of the transactions contemplated by the Investment Agreement shall be in effect, (iii) the representations and warranties of Holdings being true and correct at the closing (except where the failure to be true and correct would not have a Wayne Farms Material Adverse Effect) and (iv) there having been no Wayne Farms Material Adverse Effect (subject to certain customary exclusions).

The obligations of CMSC to fund the equity financing and of Holdings to make the Wayne Farms contribution will terminate automatically and immediately upon the termination of the Merger Agreement in accordance with its terms. The Investment Agreement may also be terminated by Holdings or CMSC if any governmental authority has issued an order, decree or ruling permanently restraining or prohibiting the transactions contemplated by the Investment Agreement, and such order, decree or ruling has become final and nonappealable (so long as a breach by the party seeking to terminate was not the proximate cause of such judgment, order, decree or ruling).

Closing and Effective Time

The closing of the Merger will take place (a) at 10:00 a.m., local time, on the third Business Day following the satisfaction or waiver of all conditions to closing of the Merger (as described under the section of this proxy statement entitled, “Proposal 1: Approval of the Merger Agreement – Conditions to the Closing of the Merger”), other than conditions that by their terms are to be satisfied at the closing of the Merger, but subject to the satisfaction or waiver of such conditions; or (b) at such other time and date as Sanderson Farms and Parent may agree in writing; provided, that in each case, the closing of the Merger may not occur before September 30, 2021 without the prior written consent of Parent.

No Appraisal Rights

The MBCA includes what is often referred to as the “market exception” to appraisal rights in the event of a merger involving shares traded in a liquid market. In particular, MBCA § 79-4-13.02(b)(2) provides as follows:

(2) Appraisal rights shall not be available for the holders of shares of any class or series of shares which is:

 

(i)

Listed on the New York Stock Exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc.; or

 

(ii)

Not so listed or designated, but has at least two thousand (2,000) shareholders and the outstanding shares of such class or series has a market value of at least twenty million dollars ($20,000,000) (exclusive of the value of such shares held by its subsidiaries, senior executives, directors and beneficial shareholders owning more than ten percent (10%) of such shares).

The applicability of this exception is determined as of the Record Date fixed to determine the Sanderson Farms Stockholders entitled to receive notice of, and to vote at, the Special Meeting.

Shares of Sanderson Farms common stock are listed for trading on NASDAQ. Further, on the Record Date Sanderson Farms had [    ] stockholders, and the market value of shares of Sanderson Farms common stock, exclusive of the value of such shares held by its subsidiaries, senior executives, directors, and beneficial stockholders owning more than ten percent (10%) of such shares exceeded twenty million dollars ($20,000,000). Thus, the Sanderson Farms common stock meets the threshold requirement for appraisal rights not to be available because of the market exception.

Even though the Sanderson Farms common stock meets this threshold requirement, the MBCA provides two potential circumstances, neither of which is applicable here, that could nevertheless result in appraisal rights being available. First, appraisal rights would be available if the Sanderson Farms Stockholders were required to

 

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accept in the Merger anything other than cash or certain marketable securities. Since the Sanderson Farms Stockholders will only receive cash in the Merger, this provision of the MBCA is not applicable. Second, the MBCA provides that appraisal rights would be available if the Merger is an “interested transaction,” as defined in the statute. An interested transaction would include a transaction in which a senior executive or director of the corporation will receive, as a result of the Merger, a financial benefit not generally available to other stockholders as such, other than (1) employment, consulting, retirement, or similar benefits established separately, and not as a part of, or in contemplation of, the Merger, or (2) employment, consulting, retirement, or similar benefits established in contemplation of or as part of the Merger that are not more favorable than those existing before the Merger, or, if more favorable, that had been approved on behalf of the corporation by certain disinterested directors. As is discussed in the section of this proxy statement entitled “The Merger—Interests of Executive Officers and Directors of Sanderson Farms in the Merger,” the senior executives will receive, as a result of the Merger, certain employment-related benefits established in contemplation of or as a part of the Merger. These were approved by the Compensation Committee of the Board of Directors, which consists solely of disinterested directors and which otherwise meets the requirements for approval of the employment-related benefits of the senior executives for the Merger not to be an interested transaction. The Merger does not meet any other definition of the statute that would cause it to be an interested transaction. Accordingly, the Merger qualifies for the market exception, and appraisal rights are not available to the Sanderson Farms Stockholders in connection with the Merger.

Accounting Treatment

The Merger will be accounted for as a “purchase transaction” for financial accounting purposes.

Material U.S. Federal Income Tax Consequences of the Merger

The following discussion is a summary of certain material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders and Non-U.S. Holders (each as defined below) of shares of Sanderson Farms common stock whose shares are converted into the right to receive cash pursuant to the Merger. This discussion is limited to Sanderson Farms Stockholders who hold their shares of Sanderson Farms common stock as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the “Code”) (generally, property held for investment purposes). This discussion is based upon the Code, Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. No assurance can be given that the IRS will not assert, or that a court would not sustain, a position contrary to any of the tax considerations described in this discussion. No advance ruling has been or will be sought from the IRS regarding any matter discussed below.

This discussion is for general information purposes only and does not purport to be a complete analysis of all of the U.S. federal income tax considerations that may be relevant to particular holders in light of their particular facts and circumstances, or to Sanderson Farms Stockholders subject to special rules under the U.S. federal income tax laws, including, for example, but not limited to:

 

•

banks and other financial institutions;

 

•

mutual funds;

 

•

insurance companies;

 

•

brokers or dealers in securities, currencies or commodities;

 

•

dealers or traders in securities subject to a mark-to-market method of accounting with respect to shares of Sanderson Farms common stock;

 

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•

regulated investment companies and real estate investment trusts;

 

•

retirement plans, individual retirement and other deferred accounts;

 

•

tax-exempt organizations, governmental agencies, instrumentalities or other governmental organizations and pension funds;

 

•

holders that are holding shares of Sanderson Farms common stock as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transactions;

 

•

U.S. Holders whose functional currency is not the U.S. dollar;

 

•

Partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities);

 

•

expatriated entities subject to Section 7874 of the Code;

 

•

holders that are required to accelerate the recognition of any item of gross income as a result of such income being recognized on an “applicable financial statement”;

 

•

persons subject to the alternative minimum tax;

 

•

U.S. expatriates and former citizens or long-term residents of the United States;

 

•

except as noted below, holders that own or have owned (directly, indirectly or constructively) 5% or more of Sanderson Farms common stock (by vote or by value);

 

•

grantor trusts;

 

•

controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax;

 

•

holders that received their shares of Sanderson Farms common stock in compensatory transactions, through a tax-qualified retirement plan or pursuant to the exercise of options or warrants;

 

•

holders that own, directly or indirectly, an equity interest in Parent following the Merger; and

 

•

holders that hold their Sanderson Farms common stock through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States.

This discussion does not address any U.S. federal tax considerations other than those pertaining to the income tax (such as estate, gift or other non-income tax consequences) or any state, local or foreign income or non-income tax considerations. In addition, this discussion does not address any considerations arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, or any considerations in respect of any withholding required pursuant to the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations promulgated thereunder and intergovernmental agreements entered into in connection therewith and any laws, regulations or practices adopted in connection with any such agreement).

If a partnership (including an entity or arrangement, domestic or non-U.S., treated as a partnership for U.S. federal income tax purposes) is a Beneficial Owner of shares of Sanderson Farms common stock, the U.S. federal income tax treatment of a partner in such partnership generally will depend upon the status of the partner, the activities of the partner and the partnership and certain determinations made at the partner level. Accordingly, partners in partnerships holding shares of Sanderson Farms common stock should consult their tax advisors as to the particular tax consequences to them of the Merger.

THE U.S. FEDERAL INCOME TAX TREATMENT OF THE TRANSACTIONS DISCUSSED HEREIN TO ANY PARTICULAR STOCKHOLDER WILL DEPEND ON THE STOCKHOLDER’S

 

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PARTICULAR TAX CIRCUMSTANCES. WE URGE YOU TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU IN CONNECTION WITH THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING U.S. FEDERAL, STATE, LOCAL AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES.

U.S. Holders

This section applies to “U.S. Holders.” For purposes of this discussion, a “U.S. Holder” means a Beneficial Owner of shares of Sanderson Farms common stock that is for U.S. federal income tax purposes:

 

•

an individual who is a citizen or resident of the United States;

 

•

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any state thereof or the District of Columbia;

 

•

an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

 

•

a trust, if (i) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (ii) the trust validly elected to be treated as a United States person for U.S. federal income tax purposes.

The receipt of cash by a U.S. Holder in exchange for shares of Sanderson Farms common stock pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. Holder will recognize capital gain or loss in an amount equal to the difference, if any, between the amount of cash received and the U.S. Holder’s adjusted tax basis in the shares of Sanderson Farms common stock surrendered pursuant to the Merger. A U.S. Holder’s adjusted tax basis generally will equal the amount that such U.S. Holder paid for the shares of Sanderson Farms common stock. A U.S. Holder’s gain or loss on the disposition of shares of Sanderson Farms common stock generally will be characterized as capital gain or loss. Any such gain or loss will be long-term capital gain or loss if such U.S. Holder’s holding period in such shares is more than one year at the time of the completion of the Merger. A preferential tax rate on capital gain generally will apply to long-term capital gain of a non-corporate U.S. Holder (including individuals). The deductibility of capital losses is subject to limitations. U.S. Holders who hold different blocks of Sanderson Farms common stock (shares of Sanderson Farms common stock purchased or acquired on different dates or at different prices) should consult their tax advisor to determine how the above rules apply to them.

Non-U.S. Holders

This section applies to “Non-U.S. Holders.” For purposes of this discussion, a “Non-U.S. Holder” means a Beneficial Owner of Sanderson Farms common stock that is neither a U.S. Holder nor an entity or arrangement treated as a partnership for U.S. federal income tax purposes.

Subject to the discussion of backup withholding below, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax in respect of gain recognized in connection with the Merger, unless:

 

•

the gain is effectively connected with a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States);

 

•

such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition of shares of Sanderson Farms common stock pursuant to the Merger, and certain other specified conditions are met; or

 

•

shares of Sanderson Farms common stock constitute a United States real property interest (a “USRPI”) by reason of the Company’s status as a “United States real property holding corporation” for U.S.

 

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federal income tax purposes (a “USRPHC”) at any time during the shorter of the five-year period preceding the effective date of the Merger or such Non-U.S. Holder’s holding period with respect to the applicable shares of Sanderson Farms common stock (the “Relevant Period”).

Unless an applicable treaty provides otherwise, gain described in the first bullet point above generally will be subject to tax at generally applicable U.S. federal income tax rates as if the Non-U.S. Holder were a U.S. resident. A Non-U.S. Holder that is a corporation for U.S. federal income tax purposes may also be subject to an additional “branch profits tax” at a 30% rate (or such lower rate specified by an applicable income tax treaty) on its “effectively connected earnings and profits” for the taxable year, as adjusted for certain items.

Gain described in the second bullet point above generally will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which generally may be offset by U.S. source capital losses of the Non-U.S. Holder, provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet above, we believe that the Company is not currently, and has not been during the Relevant Period, a USRPHC. Even if we are or were a USRPHC, gain arising from a Non-U.S. Holder’s receipt of cash in exchange for shares of Sanderson Farms common stock pursuant to the Merger will not be subject to U.S. federal income tax if the Sanderson Farms common stock is “regularly traded,” as defined in the applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of the Sanderson Farms common stock throughout the Relevant Period.

Information Reporting and Backup Withholding

Generally, information reporting requirements may apply in connection with payments made to U.S. Holders or Non-U.S. Holders in connection with the Merger.

Backup withholding of tax (currently, at a rate of 24%) generally will apply to the proceeds received by a U.S. Holder pursuant to the Merger, unless the U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-9 providing such U.S. Holder’s correct taxpayer identification number and certifying that such holder is not subject to backup withholding, or otherwise establishes an exemption, and otherwise complies with the backup withholding rules. Backup withholding of tax may also apply to the proceeds received by a Non-U.S. Holder pursuant to the Merger, unless the Non-U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable IRS Form W-8), attesting to such Non-U.S. Holder’s status as a non-U.S. person and otherwise complies with applicable certification requirements.

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a U.S. Holder or Non-U.S. Holder generally will be allowed as a credit against such holder’s U.S. federal income tax liability, if any, and may entitle such holder to a refund, provided that the required information is timely furnished to the IRS.

THE DISCUSSION ABOVE IS BASED ON CURRENT LAW. LEGISLATIVE, ADMINISTRATIVE OR JUDICIAL CHANGES OR INTERPRETATIONS, WHICH CAN APPLY RETROACTIVELY, COULD AFFECT THE ACCURACY OF THE STATEMENTS SET FORTH THEREIN. THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. IT DOES NOT ADDRESS TAX CONSIDERATIONS THAT MAY VARY WITH, OR ARE CONTINGENT ON, YOUR INDIVIDUAL CIRCUMSTANCES OR THE APPLICATION OF ANY U.S. NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. JURISDICTION AND HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING SUCH MATTERS AND THE TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

 

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Regulatory Approvals Required for the Merger

Sanderson Farms, Parent and Merger Sub have agreed to use all reasonable best efforts to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable under applicable laws to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement as promptly as practicable after the date of the Merger Agreement and in any event prior to the End Date. See the section of this proxy statement entitled “Proposal 1: Approval of the Merger Agreement—Efforts to Complete the Merger.”

Under the HSR Act and related rules and regulations, certain transactions, including the Merger, may not be completed until notifications have been given and information furnished to the Antitrust Division of the U.S. Department of Justice (the “Antitrust Division”) and the Federal Trade Commission (the “FTC”) and all statutory waiting period requirements have been satisfied. Completion of the Merger is subject to the expiration or termination of the applicable waiting period under the HSR Act. Sanderson Farms and Parent are required to file all necessary notification and report forms under the HSR Act with respect to the Merger and the other transactions contemplated by the Merger Agreement (including the transaction contemplated by the Investment Agreement) no later than 90 calendar days following the date of the Merger Agreement. However, (i) if Sanderson Farms and Parent have not filed the required notification and report forms under the HSR Act by the 30th calendar day from the date of the Merger Agreement, Sanderson Farms and Parent will consult with one another in good faith to mutually determine whether to accelerate the filing of the required notification and report forms under the HSR Act and (ii) if at any point prior to Sanderson Farms and Parent filing the required notification and report forms under the HSR Act, Parent determines in good faith that it would be necessary, proper or advisable to accelerate such filing in order to obtain the expiration of the waiting period under the HSR Act as promptly as practicable, Parent will notify Sanderson Farms thereof in writing, and Parent and Sanderson Farms will file the required notification and report forms under the HSR Act as promptly as practicable thereafter.

The Merger may also be subject to clearance or approval by the antitrust authorities in Mexico and China. Sanderson Farms and Parent will make the initial submissions for the filings in such jurisdictions no later than 30 calendar days following the date of the Merger Agreement, unless Parent and Sanderson Farms mutually determine that a filing is not required because the applicable merger control threshold for such jurisdiction are not satisfied.

At any time before or after the expiration of the statutory waiting periods under the HSR Act, the Antitrust Division or the FTC may take action under the applicable antitrust laws, including seeking to enjoin the completion of the Merger, to rescind the Merger or to conditionally permit completion of the Merger subject to regulatory conditions or other remedies. In addition, non-U.S. regulatory bodies and U.S. state attorneys general could take action under applicable antitrust laws as they deem necessary or desirable in the public interest, including, without limitation, seeking to enjoin the completion of the Merger or permitting completion subject to regulatory conditions. There can be no assurance that regulatory authorities will not impose conditions on the completion of the Merger or require changes to the terms of the transaction. Private parties may also seek to take legal action under antitrust laws under some circumstances. Although neither Parent nor Sanderson Farms believe that the Merger will violate the antitrust laws, there can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

 

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PROPOSAL 1: APPROVAL OF THE MERGER AGREEMENT

The following summary describes the material provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.

The representations, warranties, covenants and agreements described below and included in the Merger Agreement (i) were made only for purposes of the Merger Agreement and as of specific dates; (ii) were made solely for the benefit of the parties to the Merger Agreement; and (iii) may be subject to important qualifications, limitations and supplemental information agreed to by Sanderson Farms, Parent, Merger Sub and Wayne Farms in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purpose of allocating contractual risk between Sanderson Farms, Parent, Merger Sub and Wayne Farms rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Stockholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Sanderson Farms, Parent, Merger Sub or Wayne Farms or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Sanderson Farms, Parent, Merger Sub and Wayne Farms, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letter to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Sanderson Farms, Parent, Merger Sub, Wayne Farms or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Sanderson Farms and our business.

Structure of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers

At the Effective Time, Merger Sub will merge with and into Sanderson Farms, and the separate existence of Merger Sub will cease. Sanderson Farms will be the Surviving Corporation in the Merger and will continue its corporate existence as a Mississippi business corporation and an indirect wholly owned subsidiary of Parent. At the Effective Time, the articles of incorporation of Sanderson Farms as in effect immediately prior to the Effective Time will be the articles of incorporation of the Surviving Corporation until thereafter amended. At the Effective Time, the bylaws of Sanderson Farms as in effect immediately prior to the Effective Time, as amended and restated in the form set forth as an annex to the Merger Agreement, will be the bylaws of the Surviving Corporation, until thereafter amended.

The initial directors of the Surviving Corporation will be appointed by the managing member of Merger Sub immediately prior to the Effective Time. The individuals holding positions as officers of Sanderson Farms immediately prior to the Effective Time will become the initial officers of the Surviving Corporation.

When the Merger Becomes Effective

The closing of the Merger will take place (i) at 10:00 a.m., New York City time, on the third Business Day after the satisfaction or waiver (by the party having the benefit of the applicable condition) of the conditions set

 

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forth in the Merger Agreement (other than those conditions that by their nature are to be satisfied by actions to be taken at the closing of the Merger but subject to the satisfaction or waiver of such conditions) or (ii) at another date and time mutually agreed upon in writing between Sanderson Farms and Parent. However, the closing of the Merger will not occur before September 30, 2021 without Parent’s prior written consent.

At the closing of the Merger, Sanderson Farms and Merger Sub will file (i) articles of merger (the “Articles of Merger”) with the Secretary of State of the State of Mississippi and (ii) a certificate of merger with the Secretary of State of the State of Delaware. The Merger will become effective at the time when the Articles of Merger have been duly filed with the Secretary of State of the State of Mississippi, or at such later time as may be agreed by Sanderson Farms and Parent and specified in the Articles of Merger.

Effect of the Merger on the Sanderson Farms Common Stock

At the Effective Time, each share of Sanderson Farms common stock issued and outstanding immediately before the Effective Time (other than the Excepted Shares) will automatically be cancelled and converted into the right to receive the Merger Consideration of $203.00 per share of Sanderson Farms common stock in cash, without interest.

Immediately prior to the Effective Time, each of the shares of Sanderson Farms common stock owned by Sanderson Farms as treasury stock or otherwise, Parent or Merger Sub, or any wholly owned subsidiary of Sanderson Farms, Parent or Merger Sub will be cancelled without payment of any consideration and will cease to exist.

At the effective time, each share of common stock, par value $1.00 per share, of Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into one fully paid and nonassessable share of common stock, par value $1.00 per share, of the Surviving Corporation.

Withholding Rights

Parent, Sanderson Farms, Merger Sub, and the paying agent for the Merger Consideration will each be entitled to deduct and withhold any amounts required to be withheld or deducted under applicable tax laws from the amounts that would otherwise be payable under the terms of the Merger Agreement, and any such deducted or withheld amounts that are paid to the relevant governmental entity will be treated as having been paid to the person in respect of whom such amounts were deducted and withheld.

Treatment of Company Equity Awards

Company Restricted Shares. Each share of Sanderson Farms restricted stock that is outstanding immediately prior to the Effective Time (other than any such shares of Sanderson Farms restricted stock granted to employees on or following August 8, 2021) will become fully vested and be converted into the right to receive an amount in cash equal to the Merger Consideration, which will be paid no later than the fifth Business Day following the Effective Time. The levels, participants, terms and treatment of any shares of Sanderson Farms restricted stock granted to employees on or following August 8, 2021 will be agreed between Sanderson Farms and Parent.

Company Performance Share Awards for Individuals Other Than Messrs. Sanderson, Butts and Cockrell. For each performance share award that is outstanding immediately prior to the Effective Time:

 

•

each share of Sanderson Farms common stock covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during the applicable performance period as of the Effective Time) will be converted into the right to receive the Merger Consideration, which will be paid no later than the fifth Business Day following the Effective Time; and

 

•

the excess of the maximum number of shares of Sanderson Farms common stock covered by the award over the earned shares of Sanderson Farms common stock covered by the award that is earned based on actual performance through October 31, 2021 (prorated according to the number of days elapsed during

 

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the applicable performance period as of the Effective Time) will convert into an unvested cash award that will vest on the first anniversary of the closing date of the Merger or upon an earlier qualifying termination of employment, and be paid within five Business Days following the vesting date (but no later than the first anniversary of the closing date of the Merger), subject to continued employment through such vesting date.

Company Performance Share Awards for Messrs. Sanderson, Butts and Cockrell. At the Effective Time of the Merger, each outstanding performance share award held by each of Messrs. Sanderson, Butts and Cockrell will vest and be earned at the maximum level of performance, meaning 200% of the target number of shares covered by the awards (such maximum number of shares is equal to 76,500, 21,000 and 16,500, respectively), and each earned share will be converted into a right to receive an amount in cash equal to the Merger Consideration, which amount will be payable no later than the fifth Business Day following the Effective Time.

See the section of this proxy statement entitled “—Quantification of Potential Payments and Benefits to Sanderson Farms’ Named Executive Officers in Connection with the Merger” for the estimated value of unvested equity awards held by Sanderson Farms’ named executive officers.

Payment for Common Stock in the Merger

At or prior to the closing of the Merger, Parent will deposit, or cause to be deposited, with a U.S. bank or trust company that will be appointed by Parent (and reasonably acceptable to Sanderson Farms) as paying agent, in trust for the benefit of the holders of the Sanderson Farms common stock, sufficient cash to pay to the holders of the Sanderson Farms common stock the Merger Consideration. Within two Business Days following the closing date of the Merger, the paying agent is required to mail to each record holder of shares of Sanderson Farms common stock that were converted into the Merger Consideration a letter of transmittal and instructions for use in effecting the surrender of certificates that formerly represented shares of Sanderson Farms common stock or non-certificated shares represented by book-entry shares in exchange for the Merger Consideration.

The Surviving Corporation or one of its subsidiaries will pay to each holder of Sanderson Farms restricted stock and Sanderson Farms performance share awards that are outstanding immediately prior to the Effective Time, the cash amounts described under “— Treatment of Company Equity Awards” at the times described therein.

Representations and Warranties

The Merger Agreement contains representations and warranties of Sanderson Farms, subject to certain exceptions in the Merger Agreement, in the disclosure schedules delivered by Sanderson Farms in connection with the Merger Agreement and in Sanderson Farms’ public filings, as to, among other things:

 

•

organization and power to do business;

 

•

subsidiaries;

 

•

capitalization;

 

•

corporate power and authority relating to the execution, delivery, performance and consummation of the Merger Agreement and the absence of certain violations;

 

•

the forms, documents, and reports required to be filed or furnished with the SEC, and compliance of the consolidated financial statements of Sanderson Farms included in such documents;

 

•

the establishment and maintenance of certain disclosure controls and procedures and internal controls over financial reporting;

 

•

no undisclosed liabilities;

 

•

compliance with applicable laws and the possession of required permits;

 

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•

the absence of certain investigations or litigation;

 

•

compliance with applicable food safety and consumer protection laws;

 

•

the absence of certain liabilities relating to, and violations of, environmental laws;

 

•

employee benefit plans and other agreements, plans and policies with or concerning employees, and certain labor matters;

 

•

the absence of certain changes or events;

 

•

the accuracy of the information supplied by Sanderson Farms for the purposes of this proxy statement;

 

•

tax returns and other tax matters;

 

•

intellectual property matters;

 

•

real property and personal property matters;

 

•

the opinion of Centerview, Sanderson Farms’ financial advisor;

 

•

the required vote of the Sanderson Farms stockholders;

 

•

material contracts;

 

•

insurance policies;

 

•

affiliate party transactions;

 

•

finders or brokers; and

 

•

takeover statutes and absence of antitakeover agreements and plans.

The Merger Agreement also contains representations and warranties of Parent and Merger Sub, subject to certain exceptions in the Merger Agreement and the disclosure schedules by Parent delivered in connection with the Merger Agreement, as to, among other things:

 

•

organization and power to do business;

 

•

subsidiaries;

 

•

corporate power and authority relating to the execution, delivery and performance of the Merger Agreement and consummation of the Merger Agreement and the absence of certain violations;

 

•

the absence of certain investigations or actions;

 

•

the accuracy of the information supplied by Parent and Merger Sub for the purposes of this proxy statement;

 

•

the executed debt commitment letter (and associated fee letter) and executed Investment Agreement entered into between affiliates of Parent providing for a commitment to provide debt financing and equity financing, respectively, to Parent; the sufficiency of the proceeds to be disbursed under the debt commitment letter and investment agreement to pay the aggregate Merger Consideration and other amounts payable under the Merger Agreement; and the enforceability of the debt commitment letter and investment agreement;

 

•

capitalization of Merger Sub;

 

•

absence of any requirement to obtain the vote of Parent stockholders;

 

•

finders or brokers;

 

•

the absence of certain arrangements between Parent or Merger Sub or any of their affiliates, on the one hand, and any beneficial owner of more than 5% of the outstanding shares of Sanderson Farms common stock or any member of Sanderson Farms management or the Board of Directors, on the other hand, relating to the Merger Agreement or management of the Surviving Corporation;

 

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•

the absence of beneficial ownership of Sanderson Farms shares by Parent, Merger Sub or any of their respective subsidiaries;

 

•

solvency; and

 

•

the executed guarantees from affiliates of Parent guaranteeing certain obligations of Parent and Merger Sub under the Merger Agreement; the enforceability of such guarantees; and the ability of such affiliates of Parent to satisfy the full amount of the guaranteed obligations under such guarantees.

The Merger Agreement also contains representations and warranties of Wayne Farms, subject to certain exceptions in the Merger Agreement and the disclosure schedules delivered by Parent in connection with the Merger Agreement, as to, among other things:

 

•

organization and power to do business;

 

•

subsidiaries; and

 

•

corporate power and authority relating to the execution, delivery and performance of the Merger Agreement and consummation of the Merger Agreement and the absence of certain violations.

Some of the representations and warranties in the merger agreement are qualified by materiality qualifications or a “Company Material Adverse Effect” or “Parent Material Adverse Effect” qualification, as discussed below.

For purposes of the Merger Agreement, a “Company Material Adverse Effect” means an event, change, occurrence, effect or development that has had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the business, operations, or financial condition of Sanderson Farms and its subsidiaries, taken as a whole. However, a Company Material Adverse Effect will not include events, changes, occurrences, effects or developments relating to or resulting from:

 

•

any change in the market price or trading volume of Sanderson Farms common stock (provided that the underlying causes of such change may be deemed to contribute to a Company Material Adverse Effect);

 

•

the execution, announcement or pendency of the Merger Agreement (including the identity of Parent, Merger Sub or Wayne Farms); the taking of any action required or expressly contemplated by the Merger Agreement; or consummation of the transactions contemplated by the Merger Agreement, including the impact thereof on the relationships, contractual or otherwise, of Sanderson Farms with employees, labor unions, works councils, financing sources, customers, franchisees, suppliers, partners, governmental entities or other business relationship (subject to certain exceptions);

 

•

the general conditions or trends in the industries in which Sanderson Farms operates or in the economy generally or other general business, financial or market conditions, including competition in geographic, product or service areas;

•

domestic, foreign or global political conditions, economic, regulatory, financial or capital markets conditions (including interest rates, exchange rates, tariffs, trade wars and credit markets);

 

•

any act of civil unrest, civil disobedience, protests, public demonstrations, insurrection, terrorism, war, cyberterrorism, ransomware or malware, military activity, sabotage or cybercrime, national or international calamity or any other similar event;

 

•

any natural or manmade disasters, epidemics, pandemics or disease outbreaks (including COVID-19) or any acts of God;

 

•

the failure of Sanderson Farms to meet internal or analysts’ expectations or projections, forecasts, guidance, estimates or budgets (provided that the underlying causes of such change may be deemed to contribute to a Company Material Adverse Effect);

 

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•

any action or proceeding based on allegations of a breach of fiduciary duty or violation of applicable law relating to or resulting from the Merger Agreement or the transactions contemplated thereby;

 

•

any action taken by Sanderson Farms at the written direction of Parent or any action required or expressly permitted by specific provisions of the Merger Agreement to be taken by Parent, Merger Sub, Wayne Farms or Sanderson Farms pursuant to the terms of the Merger Agreement, or the failure of Sanderson Farms to take any action that Sanderson Farms is prohibited by the terms of the Merger Agreement from taking (subject to certain exceptions);

 

•

any breach by Parent, Merger Sub or Wayne Farms of the Merger Agreement;

 

•

any matter expressly set forth on Sanderson Farms’ disclosure schedules delivered in connection with the Merger Agreement as qualifying Sanderson Farms’ representation regarding the absence of a Company Material Adverse Effect since April 30, 2021, or any matter that is reasonably apparent on its face as qualifying such representation; or

 

•

any change in any applicable law (including as it may relate to COVID-19 or cyberterrorism, ransomware or malware) or GAAP.

However, to the extent such events, circumstances, conditions, changes, developments or effects in the third, fourth, fifth, sixth and twelfth bullet points above has had or would reasonably be expected to have, individually or in the aggregate, a disproportionate adverse effect on the business, financial condition or results of operations of Sanderson Farms and its subsidiaries, taken as a whole, relative to others in the industry or industries in which the Sanderson Farms and its subsidiaries operate, only the incremental disproportionate impact will be taken into account when determining whether a Company Material Adverse Effect has occurred or may, would or could occur.

For purposes of the Merger Agreement, a “Parent Material Adverse Effect” means any event, change, occurrence, effect or development that, individually or in the aggregate, prevents or materially delays or materially impairs the ability of Parent or Merger Sub to perform its obligations under the Merger Agreement or to consummate the Merger.

Conduct of Business Pending the Merger

The Merger Agreement provides that, from and after the date of the Merger Agreement and prior to the earlier of the Effective Time or termination of the Merger Agreement, except (i) as required by applicable law, (ii) with Parent’s prior written consent (which may not be unreasonably withheld, delayed or conditioned), (iii) as may be required or expressly permitted by the Merger Agreement, (iv) as set forth in the disclosure schedules delivered by the Company pursuant to the Merger Agreement, or (v) as may be required by (A) any applicable law, recommendation, decree, judgment, injunction or other order, directive, guidelines or recommendations by any governmental entity in response to COVID-19, in each case, adopted by Sanderson Farms and its subsidiaries in good faith for the protection of any natural person (“COVID-19 Measures”) or (B) any applicable government measures or regulations related to cybersecurity or any reasonable measure or change in business practices adopted in good faith by Sanderson Farms and its subsidiaries that are substantially consistent with the actions taken by other businesses facing cybersecurity issues (“Cybersecurity Measures”), Sanderson Farms (1) will, and will cause its subsidiaries to, use commercially reasonable efforts to (x) conduct its business in all material respects in the ordinary course and (y) preserve intact in all material respects its business organization, employee relationships, assets and properties, its existence in good standing, and its business relationships and (2) will not (subject to certain exceptions):

 

•

authorize or pay any dividends on or make any distribution with respect to its outstanding shares of capital stock (whether in cash, assets, stock or other securities of Sanderson Farms or its subsidiaries);

 

•

split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock;

 

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•

increase the compensation or other benefits (including severance benefits) payable or provided to the Sanderson Farms directors, employees or individual independent contractors;

 

•

enter into, amend, adopt or terminate any employment, change of control, severance or retention agreement with any director, employee or individual independent contractor of Sanderson Farms or any of its subsidiaries;

 

•

adopt any new employee benefit plan or arrangement or amend, modify or terminate any existing Sanderson Farms benefit plan;

 

•

take any action to accelerate the vesting or payment, or funding of any payment or benefit under, any Sanderson Farms benefit plan;

 

•

make any equity or equity-based grants to current or former directors, individual independent contractors, employees or any other person;

 

•

hire any employee or individual independent contractor with annual target cash compensation in excess of $350,000;

 

•

terminate the employment of any employee who is a member of the Sanderson Farms executive committee or a direct report thereof, in each case other than for cause;

 

•

enter into or amend any collective bargaining agreement or any agreement with any labor organization, works council, trade union, labor association or other employee representative;

 

•

implement any facility closing or employee layoffs that do not comply with the Worker Adjustment and Retraining Notification Act of 1988;

 

•

enter into or make any loans or advances to any of its directors, employees, agents or consultants (other than loans or advances in the ordinary course of business consistent with past practice) or make any change in its existing borrowing or lending arrangements for or on behalf of any of such persons, except as required by the terms of any Sanderson Farms benefit plan;

 

•

materially change financial accounting policies or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by GAAP or SEC rule or policy;

 

•

amend any of the organizational documents of Sanderson Farms or its subsidiaries, except as required by the rules or requirements of NASDAQ;

 

•

issue, sell, pledge, dispose of or encumber or otherwise subject to a lien (other than a Permitted Lien (as defined in the Merger Agreement)), or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of its capital stock or other ownership interests or any rights, warrants or options to acquire any such shares of capital or other ownership in any subsidiaries of Sanderson Farms or any securities convertible into, exercisable for or exchangeable for any such shares or ownership interests or take any action to cause to be vested any otherwise unvested Company Equity Award;

 

•

purchase, redeem or otherwise acquire any shares of its capital stock or any rights, warrants or options to acquire any such shares;

 

•

incur, assume, modify on terms that are adverse in any material respect to Sanderson Farms and its subsidiaries, taken as a whole, or guarantee any indebtedness for borrowed money other than in ordinary course of business;

 

•

sell, lease, license, transfer, exchange or swap, mortgage or other encumber (including securitizations) or subject to any lien (other than Permitted Liens) or otherwise dispose of any material portion of its material properties or assets, including any capital stock of subsidiaries;

 

•

modify, amend, terminate or waive any rights under any Sanderson Farms material contract in any material respect in a manner that is adverse to Sanderson Farms or its subsidiaries other than in the ordinary course of business;

 

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•

enter into any contract that, if existing on the date of the Merger Agreement, would be a Sanderson Farms material contract;

 

•

settle, pay, discharge or satisfy any action, other than any actual or threatened claim, action, suit, proceeding or investigation;

 

•

undertake certain tax-related actions;

 

•

adopt or enter into a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization, conversion or other reorganization of Sanderson Farms;

 

•

adopt a rights plan, “poison pill” or similar agreement that is, or at the Effective Time will be, applicable to the Merger Agreement, the Merger or the other transactions contemplated thereby;

 

•

permit any of its subsidiaries to sell, assign, transfer, convey, license or otherwise dispose of any material intellectual property of Sanderson Farms or its subsidiaries; and

 

•

commit or agree, in writing or otherwise, to take any of the foregoing actions.

In addition, from and after the date of the Merger Agreement and prior to the earlier of the Effective Time or termination of the Merger Agreement, except (i) as required by applicable law, (ii) as required by the Merger Agreement or Investment Agreement, (iii) as set forth in the disclosure schedules delivered by Parent pursuant to the Merger Agreement, or (iv) as may be required by COVID-19 Measures or Cybersecurity Measures, Wayne Farms will, and will cause its subsidiaries to (x) use commercially reasonable efforts to conduct its business in all material respects in the ordinary course and (y) not take any action or omit to take any action that may result in the failure of the closing conditions to the Investment Agreement. Wayne Farms will notify Sanderson Farms promptly upon any event, change, occurrence or development that would reasonably be expected to result in the failure of certain of the closing conditions to the Investment Agreement to be satisfied, and provide Sanderson Farms with such information that it may reasonably request in connection with such event, change, occurrence or development.

Access

Subject to compliance with applicable law and certain exceptions, Sanderson Farms has agreed to afford to Parent, its affiliates and to their respective officers, employees, accountants, financing sources, consultants, legal counsel, financial advisors and agents and other representatives reasonable access during normal business hours, upon reasonable advance notice, throughout the period prior to the earlier of the Effective Time and the termination of the Merger Agreement, to Sanderson Farms’ and its subsidiaries’ employees, officers, properties, contracts, commitments, books and records. However, such access will not be provided with respect to any matters that relate to the negotiation and execution of the Merger Agreement or with respect to the consideration or valuation of the Merger or any financial or strategic alternatives thereto, or that relate to any Alternative Proposal or Superior Proposal (each as defined below).

Parent has agreed that all information provided to it or any of its representatives in connection with the Merger Agreement and the consummation of the transactions contemplated thereby will be treated in accordance with the confidentiality agreements between Sanderson Farms and certain affiliates of Parent.

Alternative Proposals; No Solicitation

No Solicitation Obligations

Subject to the Merger Agreement, Sanderson Farms must not, and must cause its subsidiaries, affiliates and representatives not to, directly or indirectly:

 

•

solicit, initiate, knowingly facilitate or knowingly encourage the making or submission of any indication of interest, proposal or offer that constitutes, or that could reasonably be expected to lead to, an Alternative Proposal (as defined below);

 

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•

enter into, continue or otherwise participate in any discussions or negotiations regarding or that would reasonably be expected to lead to an Alternative Proposal or furnish to any person (other than Parent, Merger Sub or their affiliates) any non-public information of Sanderson Farms or any of its subsidiaries, in each case, in connection with or for the purpose of knowingly encouraging or facilitating an Alternative Proposal (except, in each case, solely to notify such person as to the existence of the non-solicitation provisions of the Merger Agreement or to clarify and understand the terms of any proposal or offer made by any person solely to determine whether such proposal or offer constitutes or could reasonably be expected to lead to a Superior Proposal);

 

•

enter into any letter of intent, understanding agreement in principle or agreement (whether written or oral, binding or non-binding, preliminary or definitive) providing for any Alternative Proposal (except for confidentiality agreements permitted under the Merger Agreement);

 

•

approve, endorse, or recommend, or publicly propose to approve, endorse or recommend, any Alternative Proposal; or

 

•

take any action to make any provision of any “fair price,” “moratorium,” “control share acquisition” or other form of antitakeover statute or regulation (or any related provision in Sanderson Farms’ articles of incorporation or bylaws) inapplicable to any transactions contemplated by an Alternative Proposal.

Alternative Proposal Definition

Pursuant to the Merger Agreement, an “Alternative Proposal” means any bona fide indication of interest, proposal or offer made by any person (other than Parent, Merger Sub or its affiliates) related to, for or that would result in, whether in a single transaction or a series of related transactions:

 

•

a merger, reorganization, share exchange, consolidation, business combination, recapitalization, or similar transaction involving Sanderson Farms;

 

•

the direct or indirect acquisition by any person of (i) more than 15% of the assets of Sanderson Farms and its subsidiaries on a consolidated basis or (ii) assets of Sanderson Farms and its subsidiaries to which more than 15% of the revenues or earnings of Sanderson Farms and its subsidiaries, on a consolidated basis, are attributable for the most recent fiscal year for which the audited financial statements are then available; or

 

•

the direct or indirect acquisition by any person of, or a tender offer or exchange offer that if consummated would result in such person beneficially owning, more than 15% of the outstanding shares of Sanderson Farms common stock or more than 15% of the total voting power of Sanderson Farms or any of its subsidiaries.

Existing Discussions or Negotiations

Pursuant to the Merger Agreement, Sanderson Farms has agreed to, and to cause its subsidiaries and its and their respective officers and directors and to instruct each of its other representatives, to (i) immediately following the execution of the Merger Agreement cease and cause to be terminated any solicitations, discussions or negotiations with any persons (other than Parent, Merger Sub and their respective affiliates and representatives) in connection with any Alternative Proposal, (ii) terminate access to any physical or electronic data rooms hosted by or on behalf of Sanderson Farms by any person (other than Parent, Merger Sub and their respective representatives) and (iii) deliver written notice to each such person requesting that such person (other than Parent, Merger Sub and their respective representatives) return or destroy all confidential information regarding Sanderson Farms and its subsidiaries in accordance with the applicable confidentiality agreement between Sanderson Farms and such person.

In addition, Sanderson Farms has agreed not to, and to cause its subsidiaries not to, terminate, amend, modify or waive any standstill, non-use disclosure provision with respect to an Alternative Proposal of any

 

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confidentiality, standstill or similar agreement to which Sanderson Farms or any of its subsidiaries entered into with the intent of exploring a potential Alternative Proposal, except that Sanderson Farms may grant waivers of standstill or similar provision to the extent the Board of Directors has determined in good faith, after consultation with its outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties under applicable law.

Receipt of Alternative Proposals

Sanderson Farms must promptly (and in any event within 24 hours of receipt) notify Parent in writing of (i) the receipt by Sanderson Farms, any of its subsidiaries or any of their representatives of an Alternative Proposal, (ii) any proposal or offer received by Sanderson Farms, any of its subsidiaries or any of their representatives with respect to, or that would reasonably be expected to lead to, an Alternative Proposal or (iii) any solicitations, discussions or negotiations sought to be initiated or continued with Sanderson Farms, its subsidiaries or its affiliates or any of their respective representatives concerning an Alternative Proposal. Sanderson Farms’ notice to Parent must include (i) a copy of any such Alternative Proposal, offer or proposal made in writing (including any draft agreements or term sheets, financing commitments and other agreements submitted therewith) and (ii) a summary of the material terms and conditions of any such Alternative Proposal, offer or proposal not made in writing. In addition, Sanderson Farms has agreed to (i) notify Parent in writing if Sanderson Farms determines to begin providing information or to engage in discussions or negotiations concerning an Alternative Proposal in accordance with the provisions of the Merger Agreement described in the paragraph immediately below, (ii) keep Parent reasonably informed in all material respects of the status and terms of any such Alternative Proposal, offer or proposal and (iii) provide Parent promptly after the receipt or delivery of copies of all written proposals, offers or draft agreements sent or provided to Sanderson Farms, its affiliates or its representatives from any person that describes any of the terms or conditions of any such Alternative Proposal, inquiry, offer or proposal.

Notwithstanding the non-solicitation provisions of the Merger Agreement, at any time prior to obtaining the Company Stockholder Approval, if Sanderson Farms receives an Alternative Proposal that did not result from a breach of the provisions of the Merger Agreement described above in “—No Solicitation Obligations” that the Board of Directors determines in good faith after consultation with outside legal and financial advisors would reasonably be expected to result in a Superior Proposal (as defined below), Sanderson Farms may:

 

•

furnish non-public information to the third party making the Alternative Proposal, as well as its representatives and potential financing sources, if, and only if, prior to doing so, the third party has executed a confidentiality agreement with Sanderson Farms having confidentiality provisions and other terms that are not less favorable in any material respect to Sanderson Farms than Sanderson’s Farms confidentiality agreements with certain affiliates of Parent, subject to the requirement that any such non-public information be provided to Parent prior to or substantially concurrently with the time such information is furnished to such third party; and

 

•

engage in discussions or negotiations with the third party with respect to the Alternative Proposal.

Superior Proposal Definition

Pursuant to the Merger Agreement, a “Superior Proposal” means a bona fide, unsolicited written Alternative Proposal that the Board of Directors determines in good faith, after consultation with Sanderson Farms’ outside financial and legal advisors, and considering such factors as the Board of Directors considers to be appropriate to be more favorable to Sanderson Farms and its stockholders than the transactions contemplated by the Merger Agreement and to be reasonably capable of being consummated on the terms proposed; provided, that, for purposes of the definition of Superior Proposal, the references to “15%” in the definition of Acquisition Proposal will be deemed to be references to “50%.”

 

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The Board of Directors’ Recommendation; Change of Recommendation; Superior Proposal Termination Right

As described above, and subject to the provisions described below, the Board of Directors has made the recommendation that the holders of shares of Sanderson Farms common stock vote “FOR” the proposal to approve the Merger Agreement. The Merger Agreement provides that the Board of Directors will not effect a Change of Recommendation, except as described below.

Restrictions on Change of Recommendation

Except as expressly permitted by the Merger Agreement, the Board of Directors may not:

 

•

withdraw (or modify in any manner adverse to Parent or Merger), or propose publicly to withdraw (or modify in any manner adverse to Parent or Merger Sub) the recommendation of the Board of Directors that the Sanderson Farms stockholders approve the Merger Agreement (the “Company Recommendation”);

 

•

approve or recommend to the Sanderson Farms stockholders or publicly propose to approve or recommend to the Sanderson Farms stockholders any Alternative Proposal;

 

•

fail to include the Company Recommendation in this proxy statement;

 

•

fail to reaffirm publicly the Company Recommendation within five Business Days of a written request to do so from Parent following the public disclosure of an Alternative Proposal (other than of the type referred to immediately below), except that such request may be made by Parent only once with respect to each Alternative Proposal and each amended Alternative Proposal; or

 

•

fail to publish, send or provide to the holders of shares of Sanderson Farms common stock, pursuant to Rule 14e-2(a) under the Exchange Act a statement recommending against any Alternative Proposal that is a tender or exchange offer and publicly reaffirm the Company Recommendation within 10 Business Days after the commencement (within the meaning of Rule 14d-2 under the Exchange Act) of such tender offer or exchange offer or fail to maintain such recommendation against such offer at any time before such offer has expired or been withdrawn.

The actions described in the bullet points above are referred to in this proxy statement as a “Change of Recommendation.” Notwithstanding anything to the contrary in the Merger Agreement, Sanderson Farms or the Board of Directors may (i) disclose to its stockholders a position contemplated by Rules 14d-9, 14e-2(a) or Item 1012(a) of Regulation M-A promulgated under the Exchange Act or issue a “stop, look and listen” statement pending disclosure of its position thereunder or (ii) make any disclosure to its stockholders if the Board of Directors determines in good faith, after consultation with Sanderson Farms’ outside legal counsel, that the failure of the Board of Directors to make such disclosure would be reasonably likely to be inconsistent with the directors’ exercise of their fiduciary duties to the Sanderson Farms Stockholders under applicable law; provided, that any such action or disclosure that constitutes a Change of Recommendation may only be made in accordance with the provisions of the Merger Agreement described in this section of this proxy statement and the section of this proxy statement entitled “—Change of Recommendation in Connection with Intervening Event.”

Change of Recommendation or Termination in Connection with Superior Proposal

Before the Company Stockholder Approval is obtained, the Board of Directors may, in response to a Superior Proposal received by Sanderson Farms after the date of the Merger Agreement on an unsolicited basis, (i) make a Change of Recommendation or (ii) cause Sanderson Farms to terminate the Merger Agreement prior to the receipt of the Company Stockholder Approval to enter into a definitive agreement providing for a Superior Proposal substantially concurrently with such termination, subject to the payment of the Company Termination Fee (see the section of this proxy statement entitled “—Company Termination Fee”); provided that, in each case:

 

•

the Board of Directors shall have first determined in good faith, after consultation with its outside legal counsel and financial advisors, that the Alternative Proposal constitutes a Superior Proposal;

 

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•

Sanderson Farms must have given Parent at least four Business Days’ written notice (a “Superior Proposal Written Notice”) advising Parent of such determination and its intention to make a Change of Recommendation or to terminate the Merger Agreement, which Superior Proposal Written Notice shall include a description of the material terms and conditions of the Superior Proposal that is the basis for the proposed action of the Board of Directors, the identity of the person making the Superior Proposal, together with a copy of any written offer or proposal, proposed definitive agreement, proposed or committed financing documentation and any other related documents for such Superior Proposal;

 

•

during such four Business Day period, if requested by Parent, Sanderson Farms, its subsidiaries and their respective representatives must engage in good faith negotiations with Parent and its representatives to amend the terms and conditions of the Merger Agreement in such a manner so that such Alternative Proposal would cease to constitute a Superior Proposal; and

 

•

at the end of such four Business Day period, after taking into account any proposals made by Parent to amend the terms of the Merger Agreement during the period following delivery of the Superior Proposal Written Notice, the Board of Directors concludes in good faith after consultation with its legal and financial advisors, that the Superior Proposal giving rise to the Superior Proposal Written Notice continues to constitute a Superior Proposal, subject to the commencement of a new notice period of two Business Days upon any material modifications to the terms of the Superior Proposal (including any change in the form or amount of consideration).

Change of Recommendation in Connection with Intervening Event

In addition, prior to obtaining the Company Stockholder Approval, the Board of Directors may, in response to an Intervening Event (as defined below), make a Change of Recommendation contemplated by the first or third bullet in the definition of Change of Recommendation summarized above if the Board of Directors determines in good faith, after consultation with Sanderson Farms’ outside legal counsel, that the failure of the Board of Directors to take such action would be inconsistent with its fiduciary duties under applicable law, subject to the following requirements:

 

•

Sanderson Farms must have given Parent at least four Business Days’ written notice (an “Intervening Event Notice”) advising Parent of its intention to make a Change of Recommendation, which Intervening Event Notice must include a description of the applicable Intervening Event;

 

•

during such four Business Day period, if requested by Parent, Sanderson Farms, its subsidiaries and their respective representatives must engage in good faith negotiations with Parent and its representatives to amend the terms and conditions of the Merger Agreement in such a manner that would permit the Board of Directors, consistent with its fiduciary duties, not to make such Change of Recommendation; and

 

•

at the end of such notice period, after taking into account any proposals made by Parent to amend the terms of the Merger Agreement during the period following delivery of the Intervening Event Notice, the Board of Directors determines in good faith, after consultation with Sanderson Farms’ outside legal counsel, that the failure of the Board of Directors to make such Change of Recommendation would continue to be inconsistent with its fiduciary duties under applicable law.

Under the Merger Agreement, an “Intervening Event” means any event, change, occurrence or development that is material to Sanderson Farms and its subsidiaries taken as a whole that is (i) unknown and not reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement, or if known and reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement, the material consequences of which were not known and reasonably foreseeable to the Board of Directors as of the date of the Merger Agreement and (ii) does not involve or relate to an Alternative Proposal.

 

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Company Meeting

Sanderson Farms has agreed to (i) take all action, including such actions required by NASDAQ and SEC rules and as required by the MBCA, and such actions as are required under Sanderson Farms’ articles of incorporation and bylaws, to set a record date for, duly call, give notice of, convene and hold a meeting of its stockholders promptly following the mailing of this proxy statement for the purpose of obtaining (A) the Company Stockholder Approval and (B) if so desired and mutually agreed, a vote upon other matters of the type customarily brought before a meeting of stockholders in connection with the approval of a Merger Agreement or the transactions contemplated thereby (the “Company Meeting”) and (ii) use reasonable best efforts to solicit from its stockholders proxies in favor of the approval of the Merger Agreement, subject to the Board of Director’s right to make a Change of Recommendation, as described in the section of this proxy statement entitled “The Board of Directors’ Recommendation; Change of Recommendation; Superior Proposal Termination Right.”

Sanderson Farms must keep Parent reasonably informed on a reasonably current basis of the status of its efforts to solicit the Company Stockholder Approval following the dissemination of the Proxy Statement to the Sanderson Farms Stockholders. Sanderson Farms must not, without the prior written consent of Parent, adjourn, postpone or otherwise delay the Company Meeting. However, Sanderson Farms may, without the prior written consent of Parent (and shall, on the reasonable request of Parent), adjourn or postpone the Company Meeting (subject to certain restrictions):

 

•

if Sanderson Farms believes in good faith that such adjournment or postponement is reasonably necessary to allow reasonable additional time to (i) solicit additional proxies necessary to obtain the Company Stockholder Approval, whether or not a quorum is present, or (ii) distribute any supplement or amendment to this proxy statement that the Board of Directors has determined (which subsequent distribution shall be made as promptly as practicable) in good faith after consultation with outside legal counsel is required to be filed and disseminated under applicable law and for such supplement or amendment to be reviewed by the Sanderson Farms Stockholders prior to the Company Meeting;

 

•

if Sanderson Farms reasonably believes that there will be insufficient shares of Sanderson Farms common stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Company Meeting; or

 

•

if and to the extent such postponement or adjournment of the Company Meeting is required by applicable law or on account of a force majeure event or emergency.

Sanderson Farms may not, without the prior written consent of Parent, postpone or adjourn the Company Meeting pursuant to clause (i) of the first bullet point or the second bullet point above for more than 10 Business Days on any single occasion or, on any occasion, to a date after the earlier of (x) 40 Business Days after the date on which the Company Meeting was originally scheduled and (y) 10 Business Days before the End Date.

Financing Cooperation

Parent is required to use its reasonable best efforts to obtain the equity financing, the Wayne Farms contribution and the proceeds of the debt financing on the terms and conditions described in the Merger Agreement, the Investment Agreement and the debt commitment letter, respectively, including:

 

•

maintaining in effect the Investment Agreement and debt commitment letter;

 

•

negotiating and entering into definitive agreements regarding the debt financing consistent with the terms and conditions contained in the debt commitment letter (including, as necessary, the “flex” provisions contained in any related fee letter) or on other terms that are acceptable to Parent and Merger Sub in their sole discretion and would not reasonably be expected to materially delay the closing of the Merger or adversely affect the ability of Parent and Merger Sub to consummate the transactions contemplated by the Merger Agreement;

 

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•

satisfying on a timely basis all conditions under Parent’s control in (x) the debt commitment letter and the definitive agreements regarding the debt financing and complying with its obligations thereunder and (y) the Investment Agreement and complying with its obligations thereunder; and

 

•

enforcing Parent’s rights under the debt commitment letter and the definitive agreements regarding the debt financing and the Investment Agreement.

Parent is required not to, and required not to permit Merger Sub to, without the prior written consent of the Company, which consent is not to be unreasonably withheld, conditioned or delayed, (i) terminate the debt commitment letter or any definitive agreements regarding the debt financing or (ii) permit any amendment or modification to, or any waiver of any provision under the debt commitment letter or the definitive agreements regarding the debt financing if such amendment, modification or waiver:

 

•

adds new (or modifies any existing) conditions to the consummation of all or any portion of the debt financing in a manner that would reasonably be expected to prevent, delay or impede the consummation of the Merger or the debt financing;

 

•

reduces the amount of the financing to an amount that is insufficient to meet Parent’s payment obligations under the Merger Agreement and the refinancing of certain of the Company’s outstanding indebtedness at the closing of the Merger; or

 

•

adversely affects the ability of Parent to enforce its rights against other parties to the debt commitment letter or the definitive agreements regarding the debt financing as so amended, replaced, supplemented or otherwise modified, relative to the ability of Parent to enforce its rights against the other parties to the debt commitment letter as in effect on the date of the Merger Agreement.

For the avoidance of doubt, nothing in the Merger Agreement shall prevent Parent from replacing or amending the debt commitment letter or definitive agreements regarding the debt financing in order to (w) add lead arrangers, bookrunners, syndication agents or similar entities which had not executed the debt commitment letter as of the date of the Merger Agreement and to grant to such persons such approval rights as are customarily granted to additional lenders, lead arrangers, bookrunners, syndication agents or similar entities, so long as any such addition would not reasonably be expected to prevent, delay or impede the consummation of the Merger, the debt financing or the other transactions contemplated by the Merger Agreement, (x) give effect to the market flex provisions in the fee letter related to the debt commitment letter, (y) modify titles, allocations and fee sharing arrangements with respect to existing and additional debt financing entities and (z) increase the amount of the debt financing unless, in the case of this clause (z), Parent and each of its subsidiaries would not be “Solvent” (as defined in the Merger Agreement) after giving effect to such increase and the consummation of the Merger.

Parent shall not, without the prior written consent of the Company, which consent is not to be unreasonably withheld, conditioned or delayed, (i) terminate the Investment Agreement or (ii) permit any amendment or modification to, or any waiver of any provision under the Investment Agreement if such amendment, modification or waiver:

 

•

adds new (or modifies any existing) conditions to the consummation of the contributions contemplated therein in a manner that would reasonably be expected to prevent, delay or impede the consummation of the Merger or the equity financing;

 

•

reduces the amount of the financing to an amount that is insufficient to meet Parent’s payment obligations under the Merger Agreement and the refinancing of certain of the Company’s outstanding indebtedness at the closing of the Merger; or

 

•

adversely affects the ability of Parent to enforce its rights against other parties to the Investment Agreement as so amended, replaced, supplemented or otherwise modified, relative to the ability of Parent to enforce its rights against the other parties to the Investment Agreement as in effect on the date of the Merger Agreement.

 

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In the event that any portion of the debt financing becomes unavailable, regardless of the reason therefor Parent will:

 

•

use its reasonable best efforts as promptly as practicable to obtain alternative debt financing (in an amount sufficient, when taken together with the cash contribution under the Investment Agreement and the available portion of the debt financing to consummate the transactions contemplated by the Merger Agreement and to pay related fees and expenses) on terms and conditions not materially less favorable (taken as a whole) to Parent than the terms and conditions (taken as a whole) set forth in the debt commitment letter (taking into account any market “flex” terms); and

 

•

promptly notify the Company of such unavailability and the reasons therefor.

For the purposes of the Merger Agreement, the term “debt commitment letter” will be deemed to include any commitment letter (or similar agreement) with respect to any alternative financing arranged in compliance with the Merger Agreement (and any debt commitment letter remaining in effect at the time in question).

Parent is required to provide the Company with prompt written notice, subject to certain exceptions, of (i) any actual or threatened breach, termination, repudiation or default by any party to the Investment Agreement, the debt commitment letter or any definitive agreement regarding the debt financing and (ii) the receipt of any written notice or other written communication from any debt or equity financing entity with respect to any breach, default, termination or repudiation by any party to the debt commitment letter or any definitive agreement regarding the debt financing or any provision thereof.

Prior to the closing of the Merger, the Company shall use its reasonable best efforts, and shall use its reasonable best efforts to cause its subsidiaries and its and their representatives to use reasonable best efforts, to provide all cooperation reasonably requested by Parent necessary or customary for the arrangement of the debt financing, including by:

 

•

participating in a reasonable number of meetings, presentations, road shows, due diligence sessions and sessions with rating agencies, at reasonable times and with reasonable advance notice;

 

•

to the extent required by the debt financing, using reasonable efforts to facilitate the pledging of collateral, including executing and delivering not prior to the closing of the Merger certain related documentation as may reasonably be requested by Parent;

 

•

furnishing Parent and the debt financing entities as promptly as reasonably practicable following the delivery of a request for all required information (as defined below);

 

•

furnishing to Parent and the debt financing entities all documentation and other information about the Company and its subsidiaries required by the debt financing entities with respect to the debt financing under applicable “know your customer” and anti-money laundering rules and regulations, including the USA PATRIOT Act, that is required under any debt commitment letter or any definitive agreements regarding the debt financing to the extent requested in writing to the Company within a specified time frame; and

 

•

subject to customary confidentiality provisions and disclaimers, providing customary authorization letters to the debt financing entities authorizing the distribution of information with respect to the Company and its subsidiaries to prospective lenders or investors.

The foregoing notwithstanding, neither the Company nor any of its subsidiaries shall be required to take or permit the taking of any action pursuant to the immediately preceding paragraph that: (i) would require the Company, its subsidiaries or any persons who are officers or directors of the Company or its subsidiaries to pass resolutions or consents to approve or authorize the execution of the debt financing or enter into, execute or

 

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deliver any certificate, document, opinion, instrument or agreement (except for customary authorization letters described above) or agree to any change or modification of any existing certificate, document, opinion, instrument or agreement, (ii) would cause any representation or warranty in the Merger Agreement to be breached by the Company or any of its subsidiaries (unless waived by Parent), (iii) would require the Company or any of its subsidiaries to pay any commitment or other similar fee prior to the closing of the Merger or incur any other material expense, liability or obligation in connection with the financing prior to the closing of the Merger or have any obligation of the Company or any of its subsidiaries under any agreement, certificate, document or instrument be effective until the closing of the Merger (except for customary authorization letters described above), (iv) would cause any director, officer or employee or stockholder of the Company or any of its subsidiaries to incur any personal liability (other than arising under applicable law in connection with resolutions or consents by officers or directors which are subject to the occurrence of the closing of the Merger and passed by directors or officers continuing in their positions following the closing of the Merger), (v) would conflict with the organizational documents of the Company or its subsidiaries or any applicable laws, (vi) would reasonably be expected to result in a material violation or breach of, or a default (with or without notice, lapse of time, or both) under, any contract to which the Company or any of its subsidiaries is a party, in each case, prior to the closing of the Merger, (vii) would require the Company, its subsidiaries or any of their representatives to provide access to or disclose information that the Company or any of its subsidiaries determines would jeopardize any attorney-client privilege of the Company or any of its subsidiaries, (viii) would require the Company or any of its subsidiaries or any of their representatives to prepare any financial statements or information that are not readily available to the Company or prepared in the ordinary course of its financial reporting practice or (ix) would unreasonably interfere with the ongoing operations of the Company or any of its subsidiaries. Nothing contained in the immediately preceding paragraph or otherwise shall require the Company or any of its subsidiaries, prior to the closing of the Merger, to be an issuer or other obligor with respect to the debt financing.

Parent shall promptly, upon request by the Company, reimburse the Company for all reasonable out-of-pocket costs incurred by the Company or its subsidiaries or their respective representatives in connection with such cooperation and shall indemnify and hold harmless the Company and its subsidiaries and their respective representatives from and against any and all losses suffered or incurred by them in connection with the arrangement of the debt financing, any action taken by them at the request of Parent pursuant to the second preceding paragraph and any information used in connection therewith (other than information provided in writing by the Company or its subsidiaries specifically in connection with its obligations pursuant to the second preceding paragraph); except in the event such losses are determined by a final non-appealable judgment of a court of competent jurisdiction to have arisen out of, or resulted from, the fraud, gross negligence or willful misconducts of the Company, any of its subsidiaries or any of their respective representatives.

For the purposes of the Merger Agreement, “required information” means (i) certain financial statements required pursuant to the debt commitment letter and (ii) other financial information and financial data regarding the Company and its subsidiaries of the type and form customarily included in marketing documents used to syndicate credit facilities of the type contemplated by the debt commitment letter and that is reasonably required by the debt financing entities or reasonably necessary to satisfy certain conditions pursuant to the debt commitment letter.

Employee Matters

Compensation and Benefits Continuation

Commencing at the closing of the Merger and ending on March 31, 2022, Parent will provide each current and former Sanderson Farms employee with (i) base compensation and cash incentive opportunities that are no less favorable than those provided immediately prior to the closing of the Merger and (ii) all other compensation and employee benefits (other than severance benefits) that are no less favorable in the aggregate than those provided to such employee immediately prior to the closing of the Merger.

 

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Commencing April 1, 2022 and ending on the one year anniversary of the closing of the Merger, Parent will provide each current and former Sanderson Farms employee with (i) base compensation and short-term and long-term cash incentive opportunities that are no less favorable in the aggregate than those provided to similarly situated employees of Parent and (ii) all other compensation and employee benefits (other than severance benefits, defined benefit pension, post-retirement welfare, equity incentive, retention or change in control benefits) that are no less favorable in the aggregate than those provided to similarly situated employees of Parent.

For those retired Sanderson Farms employees who receive retiree medical benefits as of immediately prior to the closing of the Merger, Parent will allow such employees and their dependents to participate in the medical benefits provided under the applicable Parent benefit plans until October 31, 2022, with any such retired employee paying 100% of the applicable premiums.

For all purposes (including for purposes of vesting, eligibility to participate and level of benefits) under the employee benefit plans of Parent providing benefits to any continuing Sanderson Farms employee after the closing of the Merger, each Sanderson Farms employee will be credited with his or her years of service to Sanderson Farms to the same extent as such employee was entitled under Sanderson Farms benefit plans prior to the closing of the Merger. Each Sanderson Farms employee will be immediately eligible to participate in new benefits plans, to the extent they are comparable to those they participated in prior to the Merger, and Parent will generally cause all pre-existing condition exclusions and actively-at-work requirements of such plans to be waived for such employee and any of his or her dependents.

Efforts to Complete the Merger

Sanderson Farms, Parent and Merger Sub have agreed to use all reasonable best efforts to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable under applicable laws to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement as promptly as practicable after the date of the Merger Agreement and in any event prior to the End Date (as defined below). Parent is required to (i) propose, negotiate, commit to and effect, by consent decree, hold separate order or otherwise, the sale, divestiture, license, hold separate or disposition of any and all of the share capital or other equity voting interest, assets (whether tangible or intangible), businesses, divisions, operations, products or product lines of Parent or its subsidiaries or affiliates or of Sanderson Farms or its subsidiaries and (ii) otherwise take or commit to take any actions that after the date of the closing of the Merger would limit Parent’s or its subsidiaries’ (including the Surviving Corporation’s) or affiliates’ freedom of action with respect to, or their ability to retain, one or more of their subsidiaries’ (including the Surviving Corporation’s), assets (whether tangible or intangible) businesses, divisions, operations, products or product lines (such actions in clauses (i) and (ii), “Divestiture Actions”). However, Parent has no obligation to undertake any Divestiture Action that (i) is not expressly conditioned on the consummation of the closing of the Merger, (ii) involves the assets, properties and rights of any affiliates of Parent, Sanderson Farms, Wayne Farms and their respective subsidiaries or (iii) would, or would reasonably be expected to, individually or in the aggregate, have a material adverse effect on the business, taken as a whole, after the closing of the Merger, of the pro forma Parent and its subsidiaries (together with the Surviving Corporation and its subsidiaries) (such a Divestiture Action, a “MAE Detriment”).

Indemnification and Insurance

For a period of six years from the Effective Time, Parent will cause the Surviving Corporation (and the Surviving Corporation will), subject to certain limitations, maintain in effect the exculpation, indemnification and advancement of expenses provisions of Sanderson Farms and any of its subsidiaries’ articles or certificates of incorporation and bylaws or similar organizational documents in effect as of the date of the Merger Agreement or in any indemnification agreements with any of their respective directors, officers, and employees appointed by Sanderson Farms’ President to serve on its executive committee (the “Executive Committee”) and those employees selected by the Executive Committee to be Division Managers (the “Executive Committee Employees”) as in effect immediately prior to the Effective Time.

 

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Further, for a period of six years after the Effective Time, Parent will cause the Surviving Corporation to, and the Surviving Corporation will, to the fullest extent permitted under applicable law, indemnify and hold harmless (and advance funds in respect of each of the foregoing or any related expenses prior to final determination that indemnification is available, as such expenses are incurred) each current and former director, officer or Executive Committee Employee or any of its subsidiaries and each person who served as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise at the request of or for the benefit of Sanderson Farms or its subsidiaries against any costs or expenses, judgments, fines, losses, claims, damages, obligations, liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of, relating to or in connection with any action or omission occurring or alleged to have occurred whether before or after the Effective Time.

For a period of six years from and after the Effective Time, Parent will cause the Surviving Corporation to, and the Surviving Corporation will, either cause to be maintained in effect the current policies of directors’ and officers’ and fiduciary liability insurance maintained by or for the benefit of Sanderson Farms and its subsidiaries and their respective current and former directors and officers or provide substitute policies for Sanderson Farms and its subsidiaries and their respective current and former directors and officers who are currently covered by the directors’ and officers’ and fiduciary liability insurance coverage currently maintained by or for the benefit of Sanderson Farms and its subsidiaries, in either case, of not less than the existing coverage and having other terms not less favorable in the aggregate to the insured persons than the directors’ and officers’ and fiduciary liability insurance coverage currently maintained by or for the benefit of Sanderson Farms and its subsidiaries and their respective current and former directors and officers with respect to claims arising from facts or events that occurred at or before the Effective Time (regardless of when such claims are brought), except that in no event will the Surviving Corporation be required to pay with respect to such insurance policies more than 300% of the aggregate annual premium most recently paid by Sanderson Farms and its subsidiaries (the “Maximum Amount”).

If the Surviving Corporation is unable to obtain the insurance required by the paragraph directly above because its cost exceeds the Maximum Amount, it will obtain as much comparable insurance as possible for the years within such six-year period for a premium equal to the Maximum Amount. In lieu of such insurance, prior to the date of the closing of the Merger, Sanderson Farms may, at its option, purchase a six-year prepaid “tail” directors’ and officers’ and fiduciary liability insurance policy for Sanderson Farms and its subsidiaries and their respective current and former directors and officers who are currently covered by the directors’ and officers’ and fiduciary liability insurance coverage currently maintained by or for the benefit of Sanderson Farms and its subsidiaries, such tail policy to provide coverage in an amount not less than the existing coverage and to have other terms not less favorable in the aggregate to the insured persons than the directors’ and officers’ and fiduciary liability insurance coverage currently maintained by or for the benefit of Sanderson Farms and its subsidiaries with respect to claims arising from facts or events that occurred at or before the Effective Time, but in no event will the cost of any such tail policy exceed the Maximum Amount.

Coordination on Stockholder Litigation

Prior to the earlier of the Effective Time or the valid termination of the Merger Agreement, Sanderson Farms will control the defense of any litigation brought by its stockholders against it and/or its directors relating to the Merger Agreement, the Merger or the other transactions contemplated by the Merger Agreement. Sanderson Farms will promptly notify Parent of any such action, keep Parent reasonably informed with respect to the status thereof and give Parent the right to review and comment on all material filings or responses to be made by Sanderson Farms in connection with any such litigation, and the right to consult on the settlement, release, waiver or compromise of any such litigation. Sanderson Farms will in good faith take such comments into account, and no such settlement, release, waiver or compromise of such litigation will be agreed to without Parent’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed).

 

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Other Covenants and Agreements

The Merger Agreement also contains additional covenants, including covenants relating to (i) the filing of this proxy statement, (ii) public announcements with respect to the transactions contemplated by the Merger Agreement, and (iii) other actions related to takeover statutes and reporting requirements under Section 16 of the Exchange Act.

In addition, the Merger Agreement requires Sanderson Farms and its subsidiaries to use commercially reasonable efforts to cooperate with Parent and its affiliates to take any actions that are reasonably necessary to ensure that, from and after the closing of the Merger, Sanderson Farms and its subsidiaries continue to benefit from any tax benefits and/or tax incentives under, and not be in default under, certain tax abatement agreements and similar arrangements listed on the disclosure schedules delivered by Sanderson Farms in connection with the Merger Agreement.

Conditions to the Closing of the Merger

Each party’s obligation to complete the Merger is subject to the satisfaction or waiver at or prior to the Effective Time of the following conditions:

 

•

receipt of the Company Stockholder Approval;

 

•

the absence of any legal restraints that prohibit or make illegal the consummation of the Merger or the transactions contemplated thereby (or, to the extent such restraint relates to antitrust law, the transactions contemplated by the Investment Agreement); and

 

•

the expiration or termination of the waiting period applicable to the consummation of the Merger or the Investment Agreement under the HSR Act, and the receipt, if required, of the Specified Regulatory Approvals.

The obligation of Sanderson Farms to complete the Merger is subject to the satisfaction or waiver by Sanderson Farms at or prior to the Effective Time of the following additional conditions:

 

•

the accuracy of the representations and warranties of Parent and Merger Sub as of the date of the Merger Agreement and as of the date of the closing of the Merger (except for any representations and warranties made as of a particular date, which representations and warranties must be true and correct only as of that date), generally subject to a Parent Material Adverse Effect qualification;

 

•

the performance by each of Parent and Merger Sub in all material respects of the obligations and covenants required to be performed or complied with by it under the Merger Agreement at or prior to the Effective Time; and

 

•

the receipt by Sanderson Farms of a certificate signed by an executive officer of Parent, dated as of the closing date of the Merger, to the effect that the conditions set forth in the two preceding bullet points have been satisfied.

The respective obligations of Parent and Merger Sub to complete the Merger are subject to the satisfaction or waiver by Parent at or prior to the Effective Time of the following additional conditions:

 

•

the accuracy of the representations and warranties of Sanderson Farms as of the date of the Merger Agreement and as of the closing date of the Merger (except for any representations and warranties made as of a particular date, which representations and warranties must be true and correct only as of that date), generally subject to certain materiality qualifiers;

 

•

the performance by Sanderson Farms in all material respects of the obligations and covenants required to be performed or complied with by it under the Merger Agreement at or prior to the Effective Time;

 

•

the absence of a Company Material Adverse Effect since the date of the Merger Agreement;

 

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•

the receipt by Parent of a certificate signed by an executive officer of Sanderson Farms, dated as of the closing date of the Merger, to the effect that the conditions set forth in the two preceding bullet points have been satisfied; and

 

•

none of the Specified Regulatory Approvals or legal restraints arising under any antitrust laws relating to the Specified Regulatory Approvals impose a MAE Detriment.

Termination

The Merger Agreement may be terminated and the Merger may be abandoned in the following circumstances:

 

•

at any time prior to the Effective Time by the mutual written consent of Sanderson Farms and Parent;

 

•

by either Sanderson Farms or Parent if, prior to the Effective Time:

 

•

the merger is not consummated on or before May 8, 2022 (which will automatically be extended to August 8, 2022 (the “End Date”) if all the conditions to closing of the Merger have been satisfied other than the existence of a legal restraint or the expiration or termination of certain applicable waiting periods or receipt of certain required approvals with respect to the consummation of the Merger or the Investment Agreement) and the terminating party did not breach in any material respect its obligations under the Merger Agreement in such a manner that was the proximate cause of the failure to consummate the Merger by such date (the “End Date Termination Right”);

 

•

the Specified Regulatory Approvals have not been received, if required, or there exists a legal restraint related to competition laws;

 

•

any governmental entity has issued a final and nonappealable order, decree or ruling permanently restraining, enjoining or otherwise prohibiting or making illegal the transactions contemplated by the Merger Agreement (including consummation of the Merger), and such order, decree or ruling has become final and nonappealable (the “Legal Restraints Termination Right”); or

 

•

the Company Meeting (including any adjournments or postponements thereof) has concluded, a vote on the approval of the Merger Agreement has occurred and the Company Stockholder Approval has not been obtained (the “Stockholder Rejection Termination Right”);

 

•

by Sanderson Farms:

 

•

if Parent or Merger Sub has breached or failed to perform any of its representations, warranties, covenants or other agreements, which breach or failure (i) would result in a failure of a condition to the obligation of each party to effect the Merger or a condition to the obligation of Sanderson Farms to effect the Merger and (ii) cannot be cured by the End Date or, if curable, is not cured within 30 Business Days following Sanderson Farms’ delivery of written notice to Parent stating Sanderson Farms’ intention to terminate the Merger Agreement (subject to Sanderson Farms not being in breach of any representation, warranty, agreement or covenant, which breach would result in a failure of a condition to the obligation of each party to effect the Merger or a condition to the obligation of Parent and Merger Sub to effect the Merger) (the “Company Breach Termination Right”);

 

•

prior to obtaining the Company Stockholder Approval, in order to enter into a definitive, written agreement, for a transaction that constitutes a Superior Proposal if (i) Sanderson Farms has complied in all material respects with its obligations with respect to a Superior Proposal as described in the section of this proxy statement entitled “The Board of Directors’ Recommendation; Change of Recommendation; Superior Termination Right;” (ii) prior to or substantially concurrently with such termination, Sanderson Farms pays the Company Termination Fee (as defined below); and (iii) promptly after such termination, Sanderson Farms enters into a definitive written agreement for such transaction that constitutes a Superior Proposal;

 

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