Inside Tyson’s Acquisition of AdvancePierre

Strategic merger prioritizes protein-focused foodservice portfolios

SPRINGDALE, Ark. and CINCINNATI -- Tyson Foods Inc. will continue its growth into the convenience-store prepared-food market with its acquisition of AdvancePierre Holdings Inc., as reported in a CSP Daily News Flash. The two companies have entered into a definitive merger agreement; the total value of Tyson’s acquisition of AdvancePierre is approximately $4.2 billion.

“We are very pleased to announce this combination with AdvancePierre,” said Tom Hayes, president and CEO of Tyson Foods, Springdale, Ark. "The AdvancePierre leadership team has created significant value through the implementation of a new business management model, focus on quality and service, and attention to the growth opportunities in convenience foods.”

AdvancePierre President and CEO Christopher D. Sliva said, “We couldn’t be more delighted to join Tyson. By combining our complementary, market-leading portfolios, both companies will realize greater opportunities. This combination will allow AdvancePierre to accelerate its growth and broaden its distribution network by leveraging Tyson’s existing distribution infrastructure and go-to-market capabilities.”

The companies outlined four key points of rationale behind the acquisition. In a joint statement, several strategic and financial considerations were highlighted, with an outlook on growth as a result of the merger. The deal ...

  • Joins market leaders with complementary product portfolios. As a national producer of ready-to-eat sandwiches, sandwich ingredients and snacks, AdvancePierre offers product categories that are complementary to Tyson’s current offerings. “The addition of AdvancePierre aligns with our strategic intent to sustainably feed the world with the fastest-growing portfolio of protein-packed brands,” said Hayes.
  • Furthers Tyson’s leadership in the prepared-foods category. AdvancePierre’s product portfolio fits into Tyson’s strategy to expand its fresh prepared-foods offering for both out-of-home and in-home dining occasions. In particular, the merger will bolster Tyson’s presence in the convenience and retail market, with products that span all three dayparts. AdvancePierre’s Barber Foods brand of value-added chicken products was identified as a core product line in both retail and foodservice channels. “We look forward to building upon its foundation of quality,” said Hayes.
  • Enhances Tyson’s financial profile. The acquisition is expected to be immediately accretive to Tyson’s earnings per share on both general account principals and a cash basis, excluding one-time costs. Based on the most recent filings by both companies, the combined initial net debt to adjusted EBITDA ratio would be approximately 2.7x, which Tyson expects to be reduced steadily by its strong cash flow, including any divestiture proceeds, supporting Tyson’s commitment to its investment-grade credit profile.
  • Creates significant cost and revenue synergies. Tyson expects the transaction will result in cost synergies of approximately $200 million, to be fully realized within three years. Cost synergies will be created by a consolidated manufacturing footprint, procurement efficiencies and distribution network consolidation, as well as addressing redundant sales and marketing functions and duplicative corporate overhead.

Tyson also sees the opportunity to use high-quality raw materials from the fresh-meats division to drive growth and efficiency. The transaction is expected to generate revenue synergies over time by using Tyson’s product platform and portfolio of brands to drive growth across AdvancePierre’s leading sandwich, entree and snack categories.

The AdvancePierre acquisition comes on the heels of Tyson’s earlier announcement that it is exploring the sale of three nonprotein businesses in its portfolio. The company is currently looking to sell its Sara Lee Frozen Bakery, Kettle and Van’s brands.

From Tyson’s viewpoint, the sale of these businesses will better position the company to be laser-focused on its core businesses and expand its “protein leadership position in retail and foodservice,” according to a statement.

“Through our ongoing strategic planning process, we’re continuously looking at ways to maximize the effectiveness and growth potential of our protein-based portfolio of products,” said Hayes. “The businesses we’re exploring to sell include well-respected brands, operations and product lines. With our protein-focused strategy, we believe other companies may be better positioned to unlock their value over time.”

AdvancePierre, Cincinnati, is a national producer and distributor of value-added, convenient, ready-to-eat sandwiches, sandwich components and other entrees and snacks to a wide variety of distribution outlets, including foodservice, retail and c-store providers.

Tyson is one of the world's largest food companies with brands such as Tyson, Jimmy Dean, Hillshire Farm, Sara Lee, Ball Park, Wright, Aidells and State Fair.

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