Tyson Foods 3Q Profit Climbs 4.4 Percent, Will Sell Chicken Business in Brazil, Mexico

Tyson Foods Inc. of Springdale, reporting a record third-quarter profit and the sale of new stock and other equity, announced Monday that it is selling poultry operations in Brazil and Mexico in order to help pay for its acquisition of Hillshire Brands Co. of Chicago.

The Mexican operations — three plants, seven distribution centers and 5,400 employees — and those in Brazil — three plants and 5,000 employees — are being sold for $575 million to JBS SA, the parent company of Pilgrim's Pride of Greeley, Colorado. Tyson outbid JBS in the race to purchase Hillshire Brands.

“Although these are good businesses with great team members, we haven’t had the necessary scale to gain leading share positions in these markets,” Smith said in a statement.

“In the short term, we’ll use the share 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.”

Tyson said it would continue to sell chicken to Mexican customers through a co-packing agreement with Pilgrim’s Pride and through its own U.S.-produced chicken.

Tyson also announced it was offering 24 million shares of common stock and 30 million tangible equity units to the public. It said it would use the money raised through sales to help pay for the Hillshire but, if the Hillshire acquisition is not completed, it would use the funds for general purposes.

The divestiture was announced shortly before third-quarter earnings were released, and Tyson's record $260 million quarterly profit represented a 4.4 percent increase from the same quarter last year.

The publicly traded meat processor (NYSE: TSN) reported earnings per share of 73 cents, up from 69 cents from a year ago. Revenue was $9.6 billion, up 11 percent from the same quarter of 2013.

“With $0.75 adjusted EPS, this was a record third quarter,” said Tyson President and CEO Donnie Smith in a statement. “Overall, our results were in line with our expectations.”

The company had previously announced it was closing three prepared food plants to improve efficiency. The plants — in Cherokee, Iowa; Buffalo, New York; and Santa Teresa, New Mexico — have been part of Tyson since it acquired IBP Inc. in 2001.

The plants employ a total of 950. The Iowa plant is scheduled to close Sept. 27, the last day of Tyson’s fiscal year and the day it expects its deal to acquire Hillshire to be completed. The other plants are scheduled to close next year.

“We are nearing the end of what looks to be the best year in our company’s history,” Smith said. “We’re looking forward to closing on the Hillshire acquisition before the end of our fourth quarter, and we’re excited about combining the protein industry’s best marketing and operations talent into one team. We’ll be ready to start the new fiscal year together and anticipate delivering Tyson’s sixth year in a row of strong earnings and operating income and also achieving our goal of at least 10 percent EPS growth in 2015.”