Tyson Foods to Divest Poultry Business in China

17 Aug, 2023

Tyson Foods to Divest Poultry Business in China.

Tyson Foods, a prominent U.S. meat and processed food manufacturer, is reportedly planning to divest its poultry business in China, according to three individuals familiar with the situation. This move aligns with a trend of multinational companies shedding their interests in China in recent years.

The company has enlisted the services of Goldman Sachs to facilitate the sale and has shared initial details with potential buyers, including various private equity firms. Although the sale is in its early stages, sources have indicated that Tyson Foods aims to find the right valuation for its China poultry business. The business currently generates approximately $1.1 billion in annual sales.

Tyson Foods, headquartered in Springdale, Arkansas, and Goldman Sachs have refrained from commenting on the matter. The individuals providing this information chose to remain anonymous due to its confidential nature.

The decision to sell the China poultry business comes against a backdrop of Tyson Foods reassessing its operations. This includes the closure of four additional U.S. chicken plants as part of a cost-cutting effort, prompted by lower-than-anticipated revenue and profit in the third quarter.

The challenges faced by China's meat market have contributed to the divestment trend. Weak demand during the COVID-19 pandemic and elevated feed prices due to geopolitical events such as the Russia-Ukraine conflict have squeezed margins for livestock farms.

A series of multinational corporations have either divested from their Chinese holdings or reduced their involvement due to factors such as intense local competition, geopolitical complexities, or China's slower economic growth.

According to Dealogic data, foreign companies have collectively divested around $8.4 billion in Chinese assets across various sectors in the current year. This follows $13.5 billion of divestitures in 2022.

In a parallel move within the food industry, Cargill, a major U.S. agricultural company, reached an agreement in May to sell its China poultry business to DCP Capital, a private equity firm. This shift echoes a broader pattern of companies streamlining their operations in China for different reasons.

The dynamics of Tyson Foods' involvement in China date back to 2001 when it established its first factory in the country. Over the years, it has expanded its presence to encompass research and development centers, processing facilities, and breeding farms. The company's activities span the entire industry spectrum in China, encompassing breeding, slaughtering, processing, and distribution of chicken, beef, pork, and processed foods.

As part of its recent endeavors, Tyson Foods launched a new processing facility in Nantong, focusing on cooked chicken and pre-made Chinese cuisine. Another facility in Xiaogan specializes in frozen and heat-processed foods.

For the nine months ending on July 1, Tyson Foods reported total sales of $39.5 billion. The international and other business segment, which encompasses its China operations, contributed $1.9 billion to this figure.