Tyson Foods sells Mexico, Brazil units to JBS subsidiaries

By Agri-Pulse staff

© Copyright Agri-Pulse Communications, Inc.



WASHINGTON, D.C., July 28, 2014 - Pilgrim's Pride, the nation's second largest poultry integrator, said today that it has agreed to buy all poultry facilities in Mexico from Tyson Foods, the No. 1 poultry processor, in a cash transaction valued at $400 million. Pilgrim's expects the deal to add some $650 million in annual revenue to its existing Mexico business.

In a parallel transaction, Tyson sold its Brazil operations to JBS Foods, owned by the Brazilian parent company of Pilgrim's. Tyson do Brasil includes three integrated production plants, two in Santa Catarina and one in the state of Parana. Tyson do Brasil employs 5,000 workers. Tyson expects the sales, which are subject to regulatory approval, to be completed by the end of 2014.

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“Although these are good businesses with great team members, we haven't had the necessary scale to gain leading share positions in these markets,” said Donnie Smith, president and CEO of Tyson Foods. “In the short term, we'll use the sale proceeds to pay down debt associated with our acquisition of Hillshire Brands. Longer term, we remain committed to our international business and will continue to explore opportunities to extend our international presence.”

Completion of the transactions would add three Tyson de Mexico plants near Torreon in north-central Mexico and seven distribution centers, with more than 5,400 employees, to Pilgrim's existing Mexican business. Pilgrim's currently has three plants and 12 distribution centers in the country. Tyson has operated the Mexico facilities for more than 20 years.

The acquisition is part of Pilgrim's “growth strategy of disciplined acquisitions that add company value for our shareholders and strengthen our strategic position in the market,” says Pilgrim's CEO Bill Lovette. Upon regulatory approval and closing, Pilgrim's anticipates maintaining operations at capacity with the existing workforce and labor contracts.

Tyson says it will continue to serve customers in Mexico with U.S.-produced chicken as well as chicken produced in Mexico, in part through a co-packaging arrangement with Pilgrim's. Tyson says it intends to remain focused on expanding its poultry operations in Asia, which include three poultry plants in China and majority ownership of two poultry plants in India. Combined, these Asian operations employ approximately 5,000 people.

Tyson's acquisition of Hillshire Farms, a further processing operation with national distribution of retail-ready meat and poultry products, is under review by Department of Justice (DOJ) antitrust regulators for its potential effect on meat industry concentration.

Late last week, a coalition of 82 activist organizations urged DOJ to extend its review of the proposed takeover of Hillshire, which would join the largest U.S. meat and poultry company, with the 11th largest meat company. The deal “would substantially undermine competition in the pork processing and hog purchasing sectors, disadvantaging farmers and consumers and undermining rural communities,” said the groups, including the National Farmers Union (NFU) and Ranchers-Cattlemen Legal Action Fund-United Stockgrowers of America (R-CALFUSA).

“Fewer buyers of hogs and sows result in a less competitive market for family farmers,” NFU President Roger Johnson said. “The rapid consolidation of market power in the hands of just a few pork processors resulted in the loss of more than 90 percent of all hog farms since 1980. Tyson's takeover of Hillshire certainly warrants further investigation by the Department of Justice and should be stopped. It's time for the Justice Department to enforce our anti-trust laws."

The activists said DOJ normally reviews such acquisitions on an accelerated 14-day timeline rather than its standard 30-day scrutiny. The complexity of the proposed merger warrants a more comprehensive review because of Tyson's significant hog and sow purchasing and marketing and because the proposed merger would enable Tyson to undermine Hillshire's sausage and lunchmeat rivals by disrupting their access to pork supplies, the activists said.

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