Pilgrim’s progress has moral for us

Be careful what you ask for, you might get it.

That admonition was around a long time before corporate mergers graced the landscape, but it should be carved above the doors of every Chapter 11 courtroom.

It seems especially appropriate for those chieftains of commerce who can’t help themselves. Those who believe bigger is better and good is never good enough.

Texas-based Pilgrim’s Pride filed for Chapter 11 bankruptcy protection Monday, succumbing to a debt load it couldn’t carry after acquiring Atlanta-based Gold Kist last year.

Pilgrim had had its sights on Gold Kist even when the local chicken producer was a co-op, according to Gold Kist’s former chairman of the board, A.D. Frazier.

After Gold Kist went public in 2004, acquiring Gold Kist became Pilgrim’s path to becoming the No. 1 chicken producer in the U.S.

At the time, Tyson was No. 1, followed by Gold Kist and Perdue.

But according to Frazier, Pilgrim’s Lonnie “Bo” Pilgrim wanted to be No. 1.

His bio reads like a Texas tall tale. Instead of oil, it was chicken. Pilgrim’s fortune and fame was built on acquisitions funded by debt.

Sounds familiar.

It is too often the story of corporate America.

Part of the meltdown in our financial sector is directly related to the bigger-is-better, biggest-is-best syndrome that led our larger commercial banks into acquiring investment banking and insurance companies.

For Gold Kist, Pilgrim paid $1.3 billion, or $21 a share, a dollar more than Pilgrim first offered and a dollar Frazier fought hard for. Even though Gold Kist shareholders tendered two-thirds of the shares to Pilgrim in late 2006, Frazier and the board had a poison pill in the bylaws that if exercised would have made the deal prohibitively expensive. As the deadline neared, Frazier insisted on $21, and he got it.

“We did a darn smoking good deal for the shareholders,” Frazier said Tuesday from Cairo, Egypt, where he was attending board of directors’ meetings of the oil company Apache Corp.

He didn’t have to add that with the deal, former Gold Kist shareholders are being spared the downturn in the chicken business.

For Pilgrim the timing could not have been worse.

When 80 percent of a chicken is corn, and the government has decided to subsidize and demand ethanol production, the price of seed goes up. Way up.

Remember oil this summer? Corn was tracking it.

It got so bad, Pilgrim hired itself a risk management expert that developed a hedge program against rising corn prices by locking in prices at its summer peak, according to reports. So, as corn prices tumbled, like oil, Pilgrim was stuck.

When it rains it pours.

And, if you aren’t careful what you ask for, you just might get it.

toliver@ajc.com