Tyson Foods reportedly in talks to acquire Keystone Foods

Springdale-based Tyson Foods is reportedly working to acquire Keystone Foods, a protein supplier to food service and retailers with annual sales of $2.8 billion worldwide and around 11,000 employees. By way of comparison, Tyson Foods posted almost $40 billion in revenue in its recent fiscal year.

Keystone is owned by Brazilian meat packer Marfrig Group, which has been seeking bids for U.S.-based Keystone Foods. Last month, Marfrig said it was evaluating bids from Tyson Foods, Cargill, and George’s, which is also based in Springdale.

Bloomberg reported Friday (July 27) that Tyson Foods is the lead bidder and close to a deal, citing two people familiar with the matter. Tyson Foods did not confirm the news and the company is within its 30-day quiet period ahead of its third quarter earnings to be reported Aug. 6. Company spokesman Gary Mickelson said in an email, “Tyson does not comment on rumors.”

The going bid is around $3 billion, according the Bloomberg report. That bid would include all the assets of Keystone in the U.S. and Asia. The $3 billion price tag is doable for Tyson Foods and there could be synergies from the deal with the two companies producing multiple protein-based products.

Keystone processed about 2 billion pounds of poultry, 300 million pounds of beef, more than 32 million pounds of fish and 12 million pounds of pork.

Keystone is based in West Chester, Penn., and operates 25 manufacturing facilities in six countries across North America, Asia, Middle East and Africa. This acquisition would give Tyson Foods a larger global footprint following its sale of operations in Mexico and Brazil in recent years.

Marfrig is working with J.P.Morgan Chase to find a single bidder for Keystone. But, the company reportedly said it would consider selling the U.S. and Asian operations separately.

Tyson Foods had a debt-to-equity ratio of around 0.82 in March, among it lowest level in the past 10 years. The company also has strong cash flow and investment grade credit rating. Earlier this year, President and CEO Tom Hayes said the company is seeking more acquisitions to grow its geographic reach. Hayes also said it was eyeing expansions to its global footprint by adding operations and increasing exports.

“If we can find those that are bolt-on to our current system that gives us more capacity in a growing category, that’s great,” Hayes said. However, valuations have been “very high,” forcing Tyson Foods to take a cautious approach, he said at the Economic Forum in Davos, Switzerland, in late January.

A $3 billion price tag is less than Tyson Foods’ $4 billion deal for AdvancePierre, which has already boosted the company’s prepared food sales. In the May earnings release, Tyson Foods said AdvancePierre sandwiches and meals brought in about $655 million for the first six months of the fiscal year in the chicken and prepared food segments. Tyson Foods said it expects the AdvancePierre acquisition to bring in about $1.3 billion in its first full fiscal year as part of the company.

Tyson Foods shares (NYSE: TSN) closed Friday at $63.56, down 15 cents. For the past 52 weeks the share price has ranged between $58.36 to $84.65.