Tyson Foods to acquire part of Brazil Foods, expand global operations

Tyson Foods on Thursday (Feb. 7) announced the pending acquisition of the Thai and European operations of Brazil Foods for $340 million. The deal will expand Tyson’s global footprint and include four processing facilities in Thailand, a processing facility in the Netherlands and in the United Kingdom.

This deal with BRF S.A. is expected to close by the third quarter and is part of the company’s strategy to expand its product offerings of value-added (higher margin) protein in global markets.

CEO Noel White said some of the biggest growth opportunities in protein are in international markets. He said the acquisition of the integrated BRF facilities will help complement and strengthen Tyson’s presence in Thailand, and provide new capabilities in Europe. White said almost of the Brazil Foods products are higher margin, and there is little commodity chicken exposure.

Tyson said the Thailand operations are fulling integrated with feed mill, hatchery, breeder and grower farms and four processing facilities. The plants produce fresh and frozen chicken, raw and fully-cooked poultry products for retail and foodservice customers in Asia and other export markets, including Europe.

The processing locations in the Netherlands and the United Kingdom are supported by in-house innovation capabilities for developing further-processed chicken products for European retail and foodservice customers.

“It’s estimated that approximately 90% of global protein consumption growth will occur outside the United States, with 60% of the volume growth coming from Asia over the next 5 years,” said Donnie King, group president of International for Tyson Foods. “Increasing our international footprint with in-country operations and export capabilities will help Tyson Foods strategically access new markets and better serve the growing global demand for our value-added protein.”

White said during the earnings that exports to South Korea are up $600 million year-over-year. Analysts on the call asked Tyson execs why they chose King to lead the company’s new and growing international business. King, who recently re-joined Tyson to lead the international segment, left Tyson in 2017. White said King brings a wealth of expertise from his years of running various segments of the business. He said as Tyson’s international portfolio grows through managing the new Keystone assets abroad and now BRF, it was important to have a veteran leader running and integrating the operations.

White said the company’s focus internationally has not changed. He said efforts to expand operations abroad have not always worked as planned but that doesn’t mean won’t in the future.

Tyson will finance the BRF deal and the Keystone Foods acquisition with a new bond offering in the coming weeks as longer term interest rates are favorable. White said future acquisitions are most likely to be focused on growing the company’s international sales or prepared foods segment.

“We will be very disciplined when we look at what the next acquisition will be. It must something that fits our long-term strategy and also be complementary to present operations,” White said.

Shares of Tyson Foods traded slightly lower Thursday in the early morning session. Tyson Foods (NYSE: TSN) shares were trading at $60.05, down 85 cents. That decline is most likely related to Tyson Foods mixed first quarter earnings report with sales down 0.4% to $10.193 billion with operating income drop of 12% to $807 million related to weaker pork and chicken profits despite record quarter for prepared foods and a strong quarter for Tyson beef. Talk Business & Politics will later today have a separate story on the earnings results.