Tyson Foods to issue $2.8 billion in corporate debt to finance acquisitions

Tyson Foods CEO Noel White said last week the meat giant would tap the bond market to finance the $2.16 billion acquisitions of Keystone Foods and the $340 million it’s doling out for the Thai and European assets of Brazil Foods (BRF S.A.) that was announced Feb. 7.

Tyson is issuing $2.8 billion in loans with three separate offerings, according to prospectus information filed with the Securities & Exchange Commission on Wednesday (Feb. 13). The first bond issue is for $800 million of notes due 2026 for a coupon yield of 4%. Moody’s has given the bonds a Baa2 rating and S&P rates the bond BBB. These ratings are in the lower medium tier of the investment grade quality. It is the lowest level before the non-investment grade or more speculative and risky rating tiers.

The bonds on the public offering were trading at slight discount to par at 99.647% with a yield to maturity of 4.958%. The bonds pay interest semi-annually on March 1 and Sept. 1.  The Joint booking managers for all three issues include Morgan Stanley. Merrill Lynch, Barclays Capital, RBC Capital, and Goldman Sachs.

There are two separate offerings for $1 billion each. The first has a coupon rate of 4.35% and a due date of 2029. The bonds have the same rating as the former with pricing discounted to offer a yield to maturity of 4.352%. The longer maturity bonds are due 2048 and were also issued at $1 billion. The bonds have a coupon rate of 5.1% and are priced at a discount to par with a total yield to maturity of 5.31%. These bonds also carry the Baa2 and BBB risk rating and are also set to pay semi-annual interest on March 1 and Sept. 1.

Tyson will file notice when the bonds have been sold to let investors know how much they reaped from the three issues. At the end of December Tyson Foods had long-term debt of $8.075 billion. The company had reduced its debt load since the end of 2017 when total obligations were valued $9.297 billion. While Tyson’s debt load will be high, the company’s ability to generate free cash to cover its obligations keeps its liquidity high. That said, some analysts warn should an earnings downturn occur, it will be harder for the company to continue investing for growth and repaying debt.

Talk Business & Politics asked White if the company was still interested in Foster Farms, as it was rumored to have been in talks with the chicken and meat manufacture only to have walked away because of price differences. White declined to talk specifically about Foster, but said there is still room on Tyson’s balance sheet for another deal if it met the all the right criteria. He said any future acquisitions would have to expand the company’s international footprint like Keystone and BRF, or they add to the company’s efforts to grow branded, higher margin product sales at retail and at foodservice. He said any future deals would be strategic and have to fit into the company’s plan to run efficiently, while also growing sales domestic and abroad.

Shares of Tyson Foods (NYSE: TSN) closed Thursday at $61.18, up 49 cents. Over the past 52 weeks the shares have traded between $49.77 and $77.31.