Posted 1/5/2009 03:46 pm
Updated 11 months ago
Richard Bond, president and CEO of Tyson Foods Inc. of Springdale, said in a news release Monday that he is leaving the company effective immediately.
Leland Tollett, former chairman and CEO of the company, is returning to the company as interim president and CEO until a permanent successor can be chosen, the meat processor said.
"After seven years of helping lead or leading the world's largest meat company, I have decided it is in both my best interest personally, and the best interest of the company for me to move on and pursue other interests," Bond said. "I have a lot of both my time and personal finances invested in Tyson Foods, so I wish the company all the best for future success."
Bond became CEO in 2006 when John Tyson stepped down as president and CEO. The move was part of a succession plan, Tyson Foods said at the time. Bond was only the company's second CEO that was not a member of the Tyson family.
Tollett, who will now be interim CEO, was the other non-family CEO. He retired from the company in 1998 at the age of 61.
Donnie Smith, a long-time Tyson executive, is being named senior group vice president of Poultry and Prepared Foods, and will have overall responsibility for those divisions of the company, the company said.
The appointment shows that as the beleaguered meat company navigates an industry plagued by volatile commodity costs and an oversupply of meat that is exacerbating already-weak chicken prices, Tyson doesn't plan to experiment, analyst Chris Bledsoe of Barclay's Capital told The Associated Press.
"He's not a spring chicken," Bledsoe said of Tollett, 71. "I think it was a prudent thing to bring in someone with this kind of operating experience."
Tollett is likely to push forward Tyson's recent efforts to shutter unprofitable plants and cut costs in meat production, Bledsoe said, according to the AP.
"It's a retooling of sorts rather than a major strategic shift," Bledsoe said.
The company is due to announce first-quarter earnings Jan. 26.
Tyson's stock has eroded in the past year as the meat industry suffered, not only because of high commodity costs but also from weak restaurant business as consumers cut back on meals out. Shares finished 2008 down 42 percent and on Monday the stock fell more than 10 percent, or 99 cents, to $8.36 after news of Bond's resignation hit.
D.A. Davidson & Co. analyst Tim Ramey lowered his rating on the stock to "underperform" from "neutral" and said he was conflicted about Bond's departure.
"If things were good, Bond would have kept his job," Ramey said in a note to clients. "New CEOS always lower the bar - but it will be hard to lower the bar further than the company already has."
He said the company will likely be in a state of limbo until a new CEO is named, which could cause weakness in the stock. He lowered his target price to $7.50.
Tollett, the former Tyson CEO, began working for Tyson in 1959 and was part of a close-knit management team including director Don Tyson that aggressively grew the company from a regional poultry producer into the world's largest meat company.
Ramey said he suspects the Tyson family, which still controls a large portion of the company, didn't like Bond's strategy of boosting chicken production levels even as competitors curbed production in the past year to boost pricing.
Tyson, the number two chicken player behind Pilgrim's Pride, increased chicken production 6 percent in its fourth quarter, which ended Sept. 27. The chicken unit posted a $118 million loss in fiscal 2008, as weak pricing limited its ability to compensate for higher production costs.
"We were disturbed by the way Mr. Bond seemed unconcerned with his risky strategy of continuing to overproduce poultry, bringing massive losses in that segment," Ramey wrote in a note to clients Monday.
But Ramey wrote that it's not entirely clear a production cut is among the reasons for Bond's departure. He pointed to the company on Monday naming Donnie Smith as senior group vice president of poultry and prepared foods and said Smith seemed to agree with Bond about not cutting production.
But Tollett has a strong track record of cutting costs, said Bledsoe, who said investors were frustrated Bond apparently decided not to cut chicken production.
The 61-year-old Bond received compensation valued by the company at about $4.9 million in fiscal 2008, according to an analysis of the 2008 proxy the company filed with the Securities and Exchange Commission last week. In 2007 his compensation was valued at $12.9 million. His 2008 compensation tumbled because the value of stock and stock options he was awarded plunged.
Tyson spokesman Gary Mickelson said Monday that the company would file a document with the SEC before the end of the week that will detail terms of Bond's separation.(The Associated Press contributed to this report.)