April 26, 2017

Tyson Foods announced it has agreed to acquire AdvancePierre, a Cincinnati-based national producer and distributor of value-added ready to eat sandwiches, sandwich components, entrées and snacks, in a deal worth $4.2 billion.

Under the terms of the agreement, which has been approved by the Boards of both companies, Tyson will acquire all of AdvancePierre’s outstanding common stock for $40.25 per share in cash, creating a strategic, combined market-leading portfolio. The total value of the deal tops $4.2 billion – reflecting $3.2 billion in equity value and $1.1 billion attributed to the assumption of AdvancePierre’s debt by Tyson. It also represents a 31.8 percent premium over AdvancePierre’s closing price on April 5, 2017.

Pursuant to the agreement, funds connected to Oaktree Capital Management, which owns approximately 42 percent of the outstanding shares in AdvancePierre, have entered into a tender and support agreement to tender their shares.

“We are very pleased to announce this combination with AdvancePierre,” said Ton Hayes, president and CEO of Tyson. “The addition of AdvancePierre aligns with our strategic intent to sustainably feed the world with the fastest growing portfolio of protein packed brands.  This transaction will provide an attractive current premium to AdvancePierre shareholders as well as significant ongoing benefits to Tyson shareholders and the customers and team members of both companies.”

As consumers turn away from highly processed and sweet snacks and toward convenient foods and snacks that offer higher protein levels, demand for meat has also increased. This shift in consumer demand has been reflected in an uptick of buyouts of meat-based snack food makers in recent years, the most recent being Conagra Brands announcing at the end of March of this year that it had agreed to acquire Thanasi Foods – a protein-based snack manufacturer and maker of Duke’s® meat snacks and BIGS Seeds, for an undisclosed amount.

Protein is increasingly becoming the name of the game for consumers. Meat consumption in the U.S. jumped by 5 percent in 2015 – the largest increase in 40 years, according to a report by Rabobank Food & Agribusiness Research and Advisory Group. Consequently, consumers are more often opting for snack foods as health plays a greater role in food choices, and younger consumers blur the lines between snacking and formal meals, reports Food Dive. Today, 24 percent of all snack foods are eaten during meal times, according to a report issued by The NPD Group, compared to 21 percent five years ago – a trend that is expected to continue, with expectations that the trend will increase by another 12 percent.

Reiterating its intention to hone its business to comply with consumer trends, Tyson also announced its plans to divest its three non-protein brands: Sara Lee Frozen Bakery, it’s Kettle business, and Van’s – all which sell products such as waffles, frozen desserts, soups, and breakfast bars.

“We are always prudently evaluating opportunities to leverage our strengths to drive future growth, whether by divesting non-core, non-protein focused assets – as announced yesterday – or by acquiring companies like AdvancePierre that enhance our capabilities in growing categories,” said Hayes.

Since pursuing an IPO in July of last year, AdvancePierre has been performing well, with its stock price nearly doubling to $24 and posting net sales of $1.6 billion for fiscal year 2016, reports Food Dive. However, this deal will be advantageous to AdvancePierre as well – enabling the company to leverage Tyson’s extensive distribution network and marketing capabilities to accelerate its own growth.

We couldn’t be more delighted to join Tyson.  By combining our complementary, market-leading portfolios, both companies will realize greater opportunities,” said Christopher Silva, president and CEO of AdvancePierre. “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. Importantly, the transaction also offers compelling and certain value for our shareholders and will provide long-term benefits for our team members and customers.”

For Tyson, not only will it expand its portfolio into more on-spot trends, the acquisition is expected to be immediately accretive to Tyson’s earnings per share on both a GAAP and cash basis, and is expected to result in cost synergies of about $200 million within three years.

-Lynda Kiernan

Lynda Kiernan is Editor with GAI Media and daily contributor to GAI News. If you would like to submit a contribution for consideration please contact Ms. Kiernan at lkiernan@globalaginvesting.com.