As part of its strategic focus on protein-packed brands, Tyson Foods Inc. is exploring the sale of three non-protein businesses, the Springdale, Arkansas-based company reported April 24. These businesses are Sara Lee Frozen Bakery, Kettle and Van’s. They produce items such as frozen desserts, waffles, breakfast bars and soups, sauces and sides.
According to Tyson, any sale would include the Chef Pierre, Bistro Collection, Kettle Collection and Van’s brands and a license to use the Sara Lee brand in various channels, as well as the company’s Tarboro, North Carolina, Fort Worth, Texas, and Traverse City, Michigan, prepared foods facilities.
Rothschild is acting as Tyson Foods’ financial advisor on the sale.
In February, Tyson Foods announced its strategy to grow its protein brands. Company officials believe the sale of these businesses will allow Tyson Foods to sharpen its focus on core businesses and expand its protein leadership position in retail and foodservice.
“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 Tom Hayes, president and CEO of Tyson Foods. “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.”
Purchase of AdvancePierre announced
A day after Tyson’s potential sale announcement, the company revealed that it had signed a definitive merger agreement in which a subsidiary of Tyson will launch a tender offer to acquire all of AdvancePierre Foods Holdings’ outstanding common shares for $40.25 per share in cash.
Tyson says that AdvancePierre’s product portfolio fits well with its strategy to expand its fresh prepared foods offering for both out-of-home and in-home eating occasions. The companies’ collective portfolio of sandwiches, sandwich components, entrees and snacks “will extend Tyson’s core strength into the fast-growing convenience and retail perimeter with solutions that span all dayparts.”
Tyson added that the Barber Foods brand of value-added chicken products is well known in both the retail and foodservice channels, “and we look forward to building upon its foundation of quality.”
AdvancePierre, headquartered in Cincinnati, Ohio, serving foodservice, retail and convenience store accounts nationally with its ready-to-eat sandwiches, sandwich components and other entrées and snacks.
With revenues of $1.6 billion in 2016 and approximately 4,500 employees, AdvancePierre’s products cover all dayparts—ready-to-eat sandwiches, such as breakfast sandwiches, peanut butter and jelly sandwiches and hamburgers; sandwich components, such as fully cooked hamburger and chicken patties, and Philly steaks; and other entrées and snacks, such as country-fried steak, stuffed entrées, chicken tenders and cinnamon dough bites.
The total enterprise value of the transaction, which has been approved by the boards of both companies, is approximately $4.2 billion, including $3.2 billion in equity value and $1.1 billion in assumption of AdvancePierre debt.
Funds affiliated with Oaktree Capital Management L.P., which own approximately 42 percent of the outstanding shares of AdvancePierre common stock, have entered into a tender and support agreement pursuant to which those funds have agreed to tender their AdvancePierre shares pursuant to the tender offer.
Tyson’s Hayes said, “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. The addition of AdvancePierre aligns with our strategic intent to sustainably feed the world with the fastest growing portfolio of protein packed brands.”
He said that adding AdvancePierre will “enhance our capabilities in growing categories. We believe that AdvancePierre and Tyson are a natural strategic fit and together will accelerate growth for customers by delivering on-trend, high quality products consumers love.”
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 also expect to realize “cost and revenue synergies” of about $200 million within three years.
Cost savings will come through consolidating the companies’ manufacturing footprint, procurement efficiencies, distribution network consolidation, and addressing redundant sales and marketing functions and duplicative corporate overhead.
The tender offer will be subject to customary conditions, including the tender of a majority of the outstanding AdvancePierre shares pursuant to the offer and receipt of required regulatory approvals and is expected to close in the third quarter of Tyson’s fiscal 2017.