Will Tyson Turn to Local Companies?

The announcement last week that Tyson Foods Inc. had offered to buy beef and pork producer IBP Inc. has muted — but not completely silenced — speculation that the aquisition-minded poultry giant might make a run on some neighbors.

One potential target, Simmons Foods Inc. of Siloam Springs, strongly denies any plan to be part of a national consolidation in the poultry industry. But both Simmons and Peterson Industries Inc. of Decatur are logical targets if the $4.2 billion acquisition of IBP doesn’t satisfy Tyson Foods’ need to grow.

Both privately held companies are part of a stagnant poultry industry that has been especially unkind to small and midsized concerns. Both underwent high-ranking personnel changes this year.

Add their 30-minute proximity to Tyson Foods in Springdale, strong hints that Tyson was back in acquisition mode and Tyson’s “focus on feathers” after two years of divesting itself of non-poultry operations, and the leap to anticipating a buyout of either Simmons or Peterson was not a big one.

Tyson president and CEO John Tyson said in the summer of 1999 that the sale of the company’s seafood division and the reduction of its debt from $1.9 billion after the acquisition of Hudson Foods to below $1.7 billion would “put us in position to be dangerous again and go get somebody.”

When Tyson’s fiscal year ended Sept. 30, Tyson’s long-term debt stood at $1.36 billion. The IBP offer, then, was surprising only in that it represented another foray into red meat.

After the Dec. 4 announcement, Tyson would not comment on the possibility of any future purchases.

Consolidating Industry

Some recent acquisitions within the poultry industry have some believing that another Tyson purchase will be made sooner rather than later.

Pilgrim’s Pride Corp. of Pittsburg, Texas, announced in November that it was acquiring WLR Foods of Virginia in a cash merger valued at about $300 million. The acquisition will move Pilgrim’s Pride, where Buddy Pilgrim was once the chief operating officer, up the ladder from fifth- to second-largest chicken company in the nation.

In 1999, Poultry Magazine listed Tyson tops in the poultry industry in sales, with Simmons No. 17, George’s Inc. of Springdale No. 22 and Peterson No. 29.

Ken Gassman Jr., senior vice president of research for the investment brokerage house Davenport & Co. of Richmond, Va., said WLR probably did not fit into Tyson’s plans.

Although WLR was the nation’s 12th-largest chicken company, Gassman said, “[WLR was] too small to be a niche player in the chicken market, and they weren’t large enough to be a Tyson or Perdue [Farms]. They were caught in the middle, and something had to happen. The more we looked at the situation, the more we felt that [WLR] probably had to be acquired.”

Tyson’s most fierce competitor — in and out of court — is ConAgra Foods Inc. of Omaha, Neb. On Nov. 11, ConAgra acquired Marburger Foods, a producer of pre-cooked bacon products.

However, analyst John Bierbusse of AG Edwards & Sons in St. Louis was not as certain that another acquisition is likely.

“[Tyson] doesn’t need an acquisition,” Bierbusse said. “They have plenty of internal business to take care of them for the foreseeable future.”

The announcement of Tyson’s possible acquisition of IBP comes less than a month after IBP began construction on a 85,000-SF, $25 million cooked meats plant in Council Bluffs, Iowa.

Simmons Says No

Three days before Tyson’s announced its offer to buy IBP, Poultry Magazine editor Tom Cosgrove said Tyson was in an “acquisition mode.”

“In view of the fact that Pilgrim’s Pride acquired WLR Foods and makes the company comparable now to Tyson in size, the acquisition and consolidation side of the industry seems to be heating up again,” Cosgrove said. “It seems very likely to me that Tyson would be ready to do something again.”

One industry official said Simmons could be in the most danger of any of the big four poultry companies based in northwest Arkansas.

Simmons, which employs more than 4,500, reportedly laid off 15-20 office personnel in November, although Buddy Pilgrim refused to verify that number. Simmons was last in the acquisition mode in 1982 when it purchased O’Brien Foods.

Simmons CEO Lindy “Buddy” Pilgrim, who came aboard in February, tried to quell any rumors of Simmons being purchased.

“Absolutely none,” Pilgrim said. “Simmons is a family-owned business, and they intend to keep it a multi-generational family business.”

Pilgrim noted that Tyson’s recent acquisitions had not been local companies.

As for Peterson

Peterson also recently underwent changes in the front office. Peterson CEO Vic Evans, president of Decatur Bancshares and son-in-law of company founder Lloyd Peterson, recently left for the second time. Exiting with Evans was Dan Peterson, president and chief operating officer of Crystal Lake Foods Inc., a Peterson subsidiary that is also based in Decatur.

Vernon Austin is the acting president at Peterson, but he did not return a reporter’s phone calls. Peterson recently entered into a poultry management partnership with Wayne Farms of Gainesville, Ga.

Peterson employs more than 1,450 and operates its lone plant in Decatur. Lloyd Peterson is a longtime board member of J.B. Hunt Transport Services Inc.