by Bill Bowden on Monday, Nov. 16, 1998 12:00 am
Thirty-one acquisitions followed, including the purchase of the Ocoma Foods Division of Consolidated Foods (which doubled the size of Tyson Foods), the hostile takeover of Holly Farms of Memphis, and the $1 billion acquisition of Hudson Foods Inc. of Rogers in 1998.
"Our basic philosophy from the early days was to grow and be an industry leader," says Tollett. "The industry needed a leader. The acquisition route was a quick way to do it, and early on it was an economical way to do it. The theory is you need to be No. 1 or No. 2 in the marketplace or you're not going to make a lot of money. Companies that have the leading brands are generally the most successful."
After receiving a master's degree in poultry nutrition at the University of Arkansas, Tollett landed his first job - with Tyson Feed and Hatchery of Springdale - and stayed with the company throughout his 39-year career.
Tollett, now 61, steadily rose through the ranks at Tyson Foods. He became chief operating officer in 1981, president in 1983, CEO in 1991 and chairman of the board in 1995. He officially retired Oct. 2 but remains on the executive committee of the company's board.
During Tollett's tenure at Tyson Foods, the company went from processing 15 million chickens per year in 1959 to 2.3 billion birds a year in 1998. Tyson Foods is responsible for about 30 percent of all poultry processed by the industry.
By fiscal 1997, Tyson Foods had $6.3 billion in annual sales with a gross profit of $1 billion and net income of $185 million. Sales are expected to top $8 billion in fiscal 1998, and net income is projected to be about $153 million. Fiscal 1998 ended Oct. 2 but the statistics weren't available by deadline for this issue of the Northwest Arkansas Business Journal.
Tollett, Don Tyson and Donald "Buddy" Wray, president and chief operating officer, worked together to make many of Tyson Foods' major decisions.
"Leland was a key player on the Tyson team from the day he came on board," says Don Tyson, who is now senior chairman of the company. "We faced some tremendous challenges and had some great times in building the company into what it is today, and it couldn't have been done without him."
The acquisition strategy proved successful, making Tyson Foods the largest poultry company in the world.
Tollett remembers the Holly Farms takeover as being particularly problematic because ConAgra made a bid for Holly after Tyson's offer.
"I don't guess you'd call it a bidding war," says Tollett, "but we got into a vigorous competition with ConAgra for the Holly company, and we wound up with it. It established us as the undisputed No. 1 in the industry once we got the Holly acquisition under our belt.
"It was hostile," Tollett says of the takeover. "We made an unsolicited bid for the stock. We thought the stock was worth more than what the company was selling for. ... We thought, strategically, it was a good fit for us, and it turned out to be so."
The Holly Farms acquisition cost Tyson Foods about $1 billion after ConAgra ran up the price by also bidding for the company. Some of the executives and employees at Holly weren't looking forward to becoming part of Tyson Foods, says Tollett.
"They would just as soon at the time have the company stay independent as Holly," he says.
"The Holly acquisition was a challenge and a long drawn-out affair," says Tollett. "We wish we could have done it quicker. ... As it turned out, we were successful in acquiring Holly. Some tremendously talented people came along with that acquisition."
Tyson sold all aspects of Holly Farms that didn't pertain to poultry production.
Tollett says the Holly Farms acquisition wasn't trouble-free, "but if we had to do it again, we'd do it, absolutely."
After the Holly Farms acquisition, Tyson Foods had several problems that Tollett says were beyond the company's ability to control.
High grain prices, relatively low beef prices and a Russian embargo of poultry from the United States hurt the company financially between 1991 and 1997.
In 1994, for the first and only time, Tyson Foods posted a net loss for the year. But Tyson had made four major acquisitions that year: Culinary Foods, Cobb-Vantress, Trasgo and Gorges. (See chart, Page 13).
The acquisition of Hudson Foods, the fifth-largest poultry company in the United States, was relatively simple compared to that of Holly Farms.
Hudson Foods had been crippled by an outbreak of E. coli bacteria that was traced to a Hudson beef processing facility in Columbus, Neb. A total of 25 million pounds of ground beef was recalled - the largest meat recall in history.
"He contacted us the last time," Tollett says of James T. "Red" Hudson, CEO of Hudson Foods. "We had been in contact with him a couple of times before that. But, by the last time, the brand name was trashed. It had no market equity. So the Hudson company contacted us the last time, and that resulted in the merger."
The acquisition of Hudson Foods included $257 million in cash, $393 million in stock and $373 million in debt that Hudson had previously acquired.
The merger added about 12,000 employees to the 59,000 who already worked for Tyson Foods.
Tollett says he and Hudson are neighbors in Rogers, but they aren't the "buddies" that some newspapers and magazines have portrayed them as.
"We're more business acquaintances than social acquaintances," says Tollett, noting that the sale of Hudson Foods wasn't negotiated over his backyard fence.
"Down through the years, we had no interest in selling, and Red didn't either for a long time," Tollett says. "He called us after the E. coli thing broke out in the late summer of 1997."
In the sale, Hudson, now 74, retained some of his operations, such a poultry distribution center and processing facility in Poland. He has formed Hudson & Associates in Rogers to oversee that operation, which will bring in about $200 million in sales this year. Hudson Foods brought in about $1.7 billion in sales during its last year of operation.
"I think it's working out good for both of us," says Tollett. "I'm not going to speak for the Hudson family, but, yes, I think it's working out."
"I would rather not have had the trouble," Hudson says of the E. coli outbreak. "I would rather not have been in the position of feeling like I had to sell. The problem was we got beat to death by the media. When they destroy your name, it's a long, hard fight back uphill. ... We were bombarded on television day in and day out. It destroyed our brand name."
Hudson says he "has never run from a fight," but he made the decision to sell Hudson Foods "on what I thought was best for a whole lot of people."
"It was a calculated decision that I made," says Hudson. "Had I to do it over again, I don't know what I would do."
Hudson says Tyson Foods had contacted him three or four times over the years about selling Hudson Foods. The last contact from Tyson Foods was made by Tollett about six weeks before the E. coli outbreak.
"After the E. coli thing, I did call him," says Hudson.
"I think he did an outstanding job over the years," Hudson says of Tollett. " I have a lot of respect for Leland."
Hudson says he agrees with Tollett's philosophy of being No.1 or No. 2 in the marketplace.
"We were headed that way," says Hudson. "I don't disagree with his analysis. To be No. 1 or No. 2 gives you a leg up. It would have been a long haul to be No. 1 or No. 2. They had a head-start on us. We were respectful competitors."
Hudson says he regrets not being involved in a large poultry operation in the United States this year. He says it will be one of the most profitable years for the industry in the past two decades.
"Everything is favorable for the poultry industry this year," says Hudson. "The grain prices are lower than they've been in 10 years."
Hudson says the situation in Poland isn't as favorable.
"It's a completely different world over there," he says.
"Frankly, to me, it's just something to do," Hudson says of his interests in Poland. He says it's "kind of" like playing with money from a Monopoly game.
In December 1997, Tyson Foods pleaded guilty to charges that it gave $12,000 worth of illegal gratuities to former Agriculture Secretary Mike Espy. The company agreed to pay $4 million in fines and $2 million to cover costs of the investigation. The plea gave immunity to Don Tyson and his son, John Tyson, who replaced Tollett this year as chairman of the board at Tyson Foods.
Independent Counsel Donald Smaltz then went after Tyson lobbyist Jack Williams and company spokesman Archie Schaffer.
Schaffer was initially found guilty of two counts pertaining to $8,556 in gratuities given to Espy, but, in September 1998, the conviction was thrown out by U.S. District Judge James Robertson in Washington, D.C. On Oct. 9, Smaltz filed a motion asking that the acquittal be reversed.
Williams was found guilty on two counts of making false statements to government agents pertaining to the gratuities. He was fined $5,000 on Nov. 2.
Espy's trial began Oct. 1 in Washington. He is charged with 35 counts of accepting illegal gifts from companies he regulated. The trial is expected to take about two months.
Tollett says the Espy investigation, along with the Russian export problems and high grain prices, "were distracting from the day-to-day running of our business, and certainly the publicity wore on us."
"Our philosophy is basically it's behind us," Tollett says of the Espy case. "We've done what we had to do as part of the settlement. We've closed that chapter in our history and gone on with our business."
Remembering the good times
"I don't try to remember the bad times," says Tollett. "I think the thing I will remember the most is not a specific event but the opportunities given to a guy coming out of school with virtually nothing but an education and the will and desire to work. ... [I went to work for a company] whose management wanted to hire good people and build a company to the stature of the one we built. That's been a great lot of fun for me.
"To build a company that was just one of the pack back then and be the industry leader and one of the world leaders has been a rush and tremendously rewarding."
Tollett says part of Don Tyson's genius was to hire talented people, let them do their jobs and "not micromanage things."
"I got to do basically anything I wanted to do," says Tollett. "I've had a great career. I loved the job. I loved the people I worked with and for. We had great fun.
"I'm grateful to Don Tyson for the opportunities he gave me. As I look back, I take some satisfaction in seeing that we built a heck of a company."
Tollett says young people have the same opportunities today that he had almost 40 years ago.
"I had been taught from an early age how to work and that loyalty and perseverance were important, and that if you did a good job for somebody, that would not go unnoticed," says Tollett. "You have to have a certain amount of patience, and you have to work hard."
When he graduated from the UA, Tollett says, he didn't think he was going to be the president of a company. He says he was in the right place at the right time - the right company in an industry that was on the verge of dramatic changes.
Tollett says a major factor in his decision to retire was his failing eyesight.
Tollett says he "stuck a pocket knife" in his right eye at the age of 5. In 1992, he had an artificial lens placed in that eye to aid his vision. In 1989, he had radiation therapy on his left eye because of cancer, and he has been losing sight in that eye ever since.
At an Arkansas Razorbacks football game this fall, Tollett noticed that he couldn't see the football when it was passed.
"Last year, I saw the ball," he says.
"The eye situation had become more of a distraction. I read with one eye closed, and I got tired of that. It was hard to go from one chart to the next. ... It just felt like it was time. It was rather sudden."
Tollett says he'll take time off to do the things he enjoys, including duck hunting near Stuttgart. He says he can't see the smaller quail well enough to hunt them, but ducks are considerably larger and should provide a visible target.
"I'm not worried about going blind," says Tollett. "But age does contribute to [loss of eyesight]. ... I don't miss going to the office, but it's a change. There's no doubt about that."
Tollett has been rewarded by Tyson Foods. Last year, he was paid more than $680,000. During his time at the company, Tollett has accumulated more than 3 million shares of Tyson stock, which is worth about $60 million.
"I bought stock every time I got the chance," says Tollett.
When Tollett retired, John Tyson, 45, who had been vice chairman, was named chairman of the company's board, and Wayne Britt, 49, who had been executive vice president and chief financial officer, was named CEO.
"I told Wayne and John, 'Hey fellas, I'm not going anywhere. I'm here if you want me and need me,'" recalls Tollett. "I'll be more than happy to lend support and advice, but I'm not going to impose my will on somebody down there because I don't think that would be right."
In the meantime, Tollett says he'll be unpacking the belongings from his office and trying to find a place for them in his house.
"I want to go hunting and finish putting up all my stuff," says Tollett. "It's still in the garage. You accumulate a lot of stuff over a 40-year period." n
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