Strategy

Tyson Buys Sandwich Maker AdvancePierre

The $4.2 billion deal beefs up Tyson's portfolio of packaged foods, a fast-growing, high-margin category.
Matthew HellerApril 25, 2017
Tyson Buys Sandwich Maker AdvancePierre

Tyson Foods has agreed to acquire ready-to-eat sandwich maker AdvancePierre Foods for about $4.2 billion in a move that will allow the largest U.S. meat company to expand its portfolio of packaged foods.

AdvancePierre’s meat sandwich and snack brands, which include Barber Foods and Landshire, will join Tyson brands such as Jimmy Dean, Hillshire Farm and Ball Park that make products such as pepperoni, bacon, hot dogs, pizza crusts and toppings.

Tyson said Tuesday it will pay $40.25 per share for AdvancePierre, a 9.8% premium to Monday’s closing price and a 91.7% premium to the price when AdvancePierre was taken public by private-equity firm Oaktree Capital in July 2016. It will also assume $1.1 billion in debt.

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The acquisition is Tyson’s largest since its $8.5 billion purchase of Hillshire Brands of Chicago in 2014.

“AdvancePierre’s product portfolio fits well with Tyson’s strategy to expand its fresh prepared foods offering for both out-of-home and in-home eating occasions,” the companies said in a news release. “The collective portfolio of sandwiches, sandwich components, entrees and snacks will extend Tyson’s core strength into the fast-growing convenience and retail perimeter with solutions that span all-day parts.”

According to Reuters, Tyson has been seeking to boost profit by offering more value-added items such as pre-seasoned products and heat-and-serve meals, which command higher margins than basic meats. On Monday, it announced it was exploring a sale of its three non-protein brands, including Sara Lee Frozen Bakery, to sharpen its focus on its core businesses.

Cincinnati-based AdvancePierre reported annual revenue of $1.6 billion in 2016 and has about 4,500 employees. Oaktree created the company through a merger of Pierre Foods, which was founded in 1946, and Advance Brands in 2010.

Tyson CEO Tom Hayes told Arkansas Business that the company looks for acquisitions that add either new brands, new categories or new geographical exposure to its portfolio. “We are focused on driving growth and driving growth fast and profitably,” he said. “We believe Tyson and AdvancePierre are a natural strategic fit to accomplish this objective.”