August 22, 2018

Tyson Foods has made yet another bold move as it works to reposition its business toward value-added protein and sustainability, announcing its agreement to acquire Keystone Foods from Marfrig for $2.16 billion in cash.

Under the terms of the deal for the major protein supplier, Tyson will acquire U.S.-based assets that include six processing plants and an innovation center in Alabama, Georgia, Kentucky, North Carolina, Pennsylvania, and Wisconsin; and global assets that include eight processing plants and three innovation centers located in China, South Korea, Malaysia, Thailand, and Australia.

Headquartered in Pennsylvania, Keystone supplies value-added chicken, beef, fish, and pork products to some of the top global quick-service restaurant chains, as well as retail and convenience stores. Over the last 12 months ending June 30, Keystone generated annual revenue of $2.5 billion and adjusted EBITDA of $211 million. Over that time period, Keystone’s U.S.-based production accounted for 65 percent of its revenue, while its plants in the Asia-Pacific region generated 35 percent. Even though the sale of protein products to restaurants is less profitable than selling branded products to consumers, Market Watch points out that the business is rather stable, and will provide Tyson Foods with an insulation against market difficulties currently being faced by the wider U.S. meat industry. It is also through Keystone’s  strong presence in key high-growth markets, that Keystone can act as a conduit of growth for Tyson.

“Keystone is a leading global protein company and will be a great addition to Tyson Foods,” said Tom Hayes, president and CEO of Tyson Foods. “This acquisition will expand our international presence and value-added production capabilities and help us deliver more value to our foodservice customers. Keystone provides a significant foundation for international growth with its in-country operations, sales and distribution network in high growth markets in the Asia Pacific region as well as exports to key markets in Europe, the Middle East and Africa.”

Gather No Moss

This deal for Keystone follows closely behind three other major moves by the company as it restructures its business.

Tyson Foods has read the writing on the consumer wall, and noted the growing upswing in popularity of protein, plant-based proteins, organic food choices, and sustainability, and has taken steps to advance its presence accordingly.

In May of this year Tyson announced its agreement to acquire the poultry rendering and blending assets of American Proteins and AMPRO Products in a deal valued at $850 million.  

The deal adds 700 current American Proteins employees to Tysons’ workforce, and gives Tyson four rendering plants located in Georgia and Alabama, as well as 13 blending facilities spread across the Southeast and Midwest regions of the U.S. – all assets that will add capacity to Tyson’s current animal byproducts business.

Tyson expects the deal to strengthen its ability to meet its sustainability goals through greater recycling of animal products for a range of uses including feed, pet food, and aquaculture, while also expanding its presence in the animal feed ingredients sector.

“Rendering plays a key role in growing our business and helping us deliver on our sustainability goals,” said Tom Hayes, president and CEO of Tyson Foods. “Through this important business, no part of the animal goes to waste, and we can recycle valuable ingredients into feed for pets and aquaculture.”

More recently, the first week of June brought two more announcements. On June 1 the company announced the divestment of its Sara Lee frozen bakery and Van’s businesses to private equity firm Kohlberg & Company for an undisclosed amount. And only days later, on June 4, Tyson announced its agreement to acquire Tecumseh Poultry, one of the lead organic branded chicken producers in the U.S., and maker of the Smart Chicken brand.

Founded in 1998, Tecumseh produces air-chilled, fresh organic chicken as well as deli chicken products and chicken sausages through its facilities in Tecumseh and Waverly, Nebraska, as well as its live operations.

“Consumers want choices. More and more consumers want options for fresh, organic food that fits their lifestyles,” said Eric Schwartz, chief marketing officer of Poultry for Tyson Foods. “The Smart Chicken brand is a leader in this key organic category, and the category’s growth makes this acquisition a strategic fit for Tyson Foods.”

-Lynda Kiernan