Juggling funds to pay for its impending purchase of Hillshire Brands, Tyson Foods Inc. July 28 announced an agreement to sell its poultry businesses in Mexico and Brazil to Brazilian competitor JBS SA.
Actually, JBS SA will pay $175 million for Tyson do Brasil, and Pilgrim's Pride, which is 75 percent owned by JBS, will buy Tyson de México for $400 million.
Interestingly, it was JBS and Pilgrim's Pride that Tyson was competing with in the May/June bidding war for Hillshire.
The Tyson Latin American sale is valued at $575 million and will be paid for in cash. The parties expect the sale to be completed by the end of 2014. JBS and Pilgrim’s Pride said they expect to maintain all the operations working to capacity with the existing workforce and to maintain all labor contracts in both countries.
Tyson de México is a vertically integrated poultry business based in Gomez Palacio in North Central México for more than 20 years. It has three plants and employs more than 5,400 team members in three plants, seven distribution centers and offices. Annual revenues are approximately $650 million.
Tyson do Brasil, which has existed since 2008, employs 5,000 in three integrated production plants, two in the state of Santa Catarina and one in the state of Parana. Annual revenues are estimated at $350 million.
“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.”
Tyson Foods will continue to serve customers in Mexico. The company will supply them with U.S.-produced chicken as well as chicken produced in Mexico, in part through a co-packaging arrangement with Pilgrim’s Pride.
Tyson Foods’ intends to remain focused on growing 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.