JBS subsidiaries to acquire Tyson Foods’ poultry businesses

28-Jul-2014 - Last updated on 31-Jul-2014 at 13:21 GMT

Tyson de México comprises three plants and more than 5,400 employees

Tyson Foods is to sell its Mexican and Brazilian poultry business to JBS subsidiaries in a deal worth a total of $575 million.

Pilgrim’s Pride Mexico, the majority owner of which is JBS USA Holdings, has entered into a "definitive agreement" with Tyson Foods Inc regarding the purchase of its poultry business in Mexico, while JBS Foods, a subsidiary of JBS SA, is to acquire Tyson’s Brazilian business.

The sale forms part of Tyson’s strategy to remain focused on its growing poultry operations in Asia, which include three poultry plants in China and the majority ownership of two plants in India.

The Mexican business, known as Tyson de México, is a vertically integrated poultry business based in Gomez Palacio in north central México. It comprises three plants and employs more than 5,400 staff in its plants, offices and seven distribution centres.

Tyson do Brasil is made up of three fully integrated production plants, two in Santa Catarina and one in the state of Parana, employing 5,000 staff in total.

According to Tyson Foods, JBS and Pilgrim’s Pride currently expect to maintain all the operations, working to capacity with the existing workforce, and to maintain all labour contracts in both countries.

Donnie Smith, president and chief executive, said: "Although these are good businesses with great team members, we haven’t had the necessary scale to gain leading share positions in these markets.

"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."

The firm added that it would continue to serve customers in Mexico through the supply of US-produced chicken, as well as chicken produced in Mexico, in part through a co-packaging arrangement with Pilgrim’s Pride.

Pilgrim’s Pride Mexico said it hoped to realise incremental annual revenue of approximately US$650m following the transaction – valued at $400m.

Bill Lovette, president and chief executive of Pilgrim’s Pride Corporation, said: "Today’s announcement demonstrates Pilgrim’s continued commitment to our growth strategy of disciplined acquisitions that add company value for our shareholders and strengthen our strategic position in the market."

The combined transaction is valued at $575m and will be paid for in cash, subject to satisfactory regulatory approval. Tyson Foods expects the sale to complete by the end of 2014.

Last month Tyson Foods tabled a $63 per share offer for Chicago-based Hillshire Brands, in a deal thought to be worth around $8.55bn.