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Tyson Foods to Acquire Keystone Foods for $2.5 Billion

USAgNet - August 20, 2018

Tyson Foods Inc., the largest U.S. meat producer, agreed to buy chicken-nugget maker Keystone Foods LLC for about $2.5 billion, according to a person familiar with the matter. Bloomberg reports that Brazil's Marfrig Global Foods SA, which is selling Keystone, will retain a U.S. hamburger factory, said the person, who asked not to be identified because the transaction hasn't been formally announced.

The price of the deal is less than the $3 billion initially expected after conditions in the U.S. chicken market deteriorated, the person said. Demand in the U.S. has softened and domestic supply has risen, Tyson said earlier this month. Springdale, Arkansas-based Tyson and Marfrig declined to comment on the deal, which was first reported by Reuters. Marfrig shares jumped as much as 8.3 percent in Sao Paulo.

The acquisition is Tyson's largest since it bought sandwich maker AdvancePierre Foods Holdings Inc. in 2017. Under Chief Executive Officer Tom Hayes, Tyson has been trying to expand its range of prepared-foods offerings. The Keystone deal comes at a time when U.S. producers are grappling with weakening meat prices amid higher supplies and import tariffs imposed by China and Mexico in retaliation against U.S. duties on metal shipments.

Keystone, which supplies nuggets to McDonald's Corp., had revenue of $2.8 billion last year. It has operations in seven U.S. states as well as in South Korea, China, Malaysia, Thailand and Australia. While its American assets account for almost 70 percent of sales, the food-service company has experienced stronger growth from its Asian arm. As well as chicken nuggets, Keystone also makes beef patties, ready-to-cook chicken wings and fish filets, reports Bloomberg.

Besides Tyson, Keystone attracted bids from Cargill Inc., China's Cofco Ltd. and an unidentified Japanese firm, two people with direct knowledge of the matter said in June. George's Inc. -- a family-owned chicken producer based in Springdale, Arkansas -- also presented a binding offer.

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