According to three persons with knowledge of the situation, American producer of meat and processed foods Tyson Foods intends to sell its chicken business in China. This is the latest instance in recent years of a multinational corporation attempting to exit the nation.
According to two of the people, the company has hired Goldman Sachs to provide advice on the sale and has sent preliminary information to a number of private equity companies and other potential buyers. They also noted that the selling process is still in its early stages. The China poultry business has annual sales of around $1.1 billion, according to one of the people, although it was not immediately clear what valuation Tyson Foods is seeking for it.Tyson Foods and Goldman Sachs, both in Springdale, Arkansas, declined to comment. The individuals declined to be named since the information was private and they did not disclose why Tyson planned to sell the company.
Calls to the Shanghai headquarters of Tyson Foods in China went unanswered.In a recent effort to cut expenses after its third-quarter revenue and profit fell short of Wall Street estimates, Tyson announced this month that it was reviewing every aspect of its business and closing four more chicken plants in the United States.
According to observers, China’s meat market has grown more difficult as a result of constricted livestock farm margins over the past two years as a result of low demand during the COVID-19 epidemic and rising feed costs as a result of the Russia-Ukraine war.According to bankers, a number of global corporations have sold their China operations or reduced their stakes in recent years as some struggled to realise the expected profits due to the slower economic growth, fierce local competition, or geopolitical headwinds in the nation.
According to Dealogic statistics, foreign corporations have sold $8.4 billion worth of Chinese assets overall so far this year, down from $13.5 billion in 2022.In the food sector, American agricultural juggernaut Cargill agreed to pay an undisclosed sum to private equity company DCP Capital to purchase its chicken business in China.
The Chinese infant formula and child nutrition businesses of British consumer goods manufacturer Reckitt Benckiser Group were sold to investment company Primavera Capital Group in 2021 for an enterprise value of $2.2 billion. Despite starting the sale of its Friso infant nourishment business in December 2021, Dutch dairy cooperative FrieslandCampina has not yet found a buyer. In July 2022, it transferred ownership of a Chinese infant formula factory to a regional rival, Inner Mongolia Yili Industrial Group.
In an effort to reduce its debt-to-asset ratio, major Chinese feed and meat maker New Hope Liuhe informed investors last month that it was assessing its companies and possibly bringing in strategic investors for its poultry and food businesses.According to its website for China operations, Tyson Foods built its first factory there in 2001 and today has four R&D facilities, six processing plants, and dozens of breeding farms there.
It provides poultry, beef, pork, and processed foods throughout the entire value chain of the business in China, from breeding and slaughtering to processing and distribution.According to the company’s website, in June it opened two new factories: one in the eastern Chinese city of Nantong that specialises in frozen and heat-processed meals, and one in the central Chinese city of Xiaogan that specialises in processed foods such cooked chicken and pre-made Chinese cuisine.
For the nine months that ended on July 1 of this year, Tyson Foods recorded total revenues of $39.5 billion, of which $1.9 billion came from the foreign and other business sector, which includes its operations in China.(Adapted from Reuters.com)
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