HONG KONG/NEW YORK – Tyson Foods, a prominent U.S. meat and processed food manufacturer, is contemplating the sale of its poultry division in China. This move is seen as part of an emerging trend among global firms reconsidering their stakes in the Chinese market.
Tyson Foods has solicited the expertise of Goldman Sachs to counsel on this potential sale. Initial details have been discreetly shared with several prospective purchasers, prominently among private equity circles. Notably, the discussions and deliberations are still in the formative phase.
The exact valuation Tyson Foods expects for its China poultry sector remains under wraps. However, insiders have noted that this segment registers an impressive annual revenue nearing $1.1 billion.
Both Tyson Foods, headquartered in Springdale, Arkansas, and Goldman Sachs chose to remain reticent on the matter. The motivations driving this prospective sale remain undisclosed, maintaining a shroud of corporate confidentiality.
Attempts to connect with Tyson Foods’ main office in Shanghai bore no results.
Earlier this month, Tyson’s announcement underscored a strategic assessment of its operations, accentuated by the shutdown of four U.S. chicken facilities. This move was an endeavor to trim costs in the wake of their third-quarter fiscal performance, which couldn’t match the predictions of financial analysts.
Challenges in China’s meat market have escalated. The last two years have observed livestock profitability being compressed, attributed to diminished demand amidst the COVID-19 crisis and augmented feed costs, a ripple effect of the Russia-Ukraine conflict.
Numerous global enterprises have scaled back their investments in China, with some navigating turbulent economic growth, formidable local contenders, or geopolitical fluctuations.
A notable shift is evident in the number of foreign firms offloading Chinese assets, with this year seeing assets worth $8.4 billion being sold. This follows the $13.5 billion transactions completed in 2022.
Spotlighting the food sector, Cargill, a U.S. agribusiness behemoth, sealed an agreement in May, divesting its China poultry wing to DCP Capital for an undisclosed sum. In 2021, UK’s Reckitt Benckiser Group parted with its China infant nutrition division, handing it over to Primavera Capital Group for a valuation of $2.2 billion. Meanwhile, FrieslandCampina from the Netherlands still seeks a buyer for its Friso infant nutrition brand since December 2021, though they successfully sold an infant-formula factory to Inner Mongolia Yili Industrial Group the following year.
China’s New Hope Liuhe, a leading feed and meat enterprise, has intimated its stakeholders of a strategic overhaul. They are mulling the inclusion of strategic partners for their poultry and food divisions, aiming to optimize their financial health.
Established in 2001, Tyson Foods has considerably expanded its footprint in China. Their operations span four innovation hubs, multiple processing facilities, and a web of breeding farms, as detailed on their China-centric website.
Their comprehensive operations in China are end-to-end – encompassing breeding, processing, slaughtering, and distribution of diverse products like chicken, beef, pork, and an array of processed foods.
June witnessed Tyson Foods inaugurating a new facility in Nantong, dedicated to processed items such as ready-to-eat chicken and traditional Chinese dishes. Another facility was launched in Xiaogan, concentrating on frozen and thermally processed products.
For the fiscal term culminating on July 1, Tyson Foods recorded a staggering $39.5 billion in sales, with $1.9 billion being attributed to its international segment, inclusive of its Chinese operations.