Tyson Foods (TSN) Completes AdvancePierre Buyout for $4.2B
Tyson Foods, Inc. TSN has successfully completed the buyout of AdvancePierre Foods Holdings, Inc., announced on Apr 25. The $4.2 billion deal includes $3.2 billion in equity value and $1.1 billion in assumption of AdvancePierre’s debt. With regard to this, the company completed a tender offer to acquire all the outstanding shares of AdvancePierre for $40.25 per share in cash, without interest.
In order to finance the acquisition, the company sold $300 million aggregate principal amount of its Floating Rate Senior Notes due 2019, $350 million aggregate principal amount of the 2020 notes, $1,350 million aggregate principal amount of the 2027 notes and $750 million aggregate principal amount of its 2047 notes in underwritten public offerings. The proceeds, along with cash in hand, borrowings under new term loans and the issuance of commercial paper or commercial notes were used to repay full AdvancePierre’s outstanding 5.50% senior notes due 2024 and AdvancePierre’s outstanding first lien term loan, as well as some other payments.
AdvancePierre Foods is the leading producer of ready-to-eat lunch and dinner sandwiches and snacks and seems a strategic fit to Tyson Foods, which is seeking to expand in the fast growing portfolio of protein packed brands. Tyson Foods expects the transaction to generate cost synergies of $200 million within three years and also to be accretive to earnings.
Tyson Foods’ Performance
We note that Tyson Foods posted dismal second-quarter fiscal 2017 results on May 8, wherein both the top line and bottom line missed the Zacks Consensus Estimate and also declined year over year. Despite strong chicken demand, results were hurt as a fire at two of its plants in the aforesaid period disrupted production. Further, the company is currently facing volume declines and increased costs in the foodservice Prepared Foods business. Moreover, Tyson Foods’ Beef segment’s performance has been dismal of late due to higher domestic availability of fed cattle supplies and lower livestock costs.
Nevertheless, we believe AdvancePierre’s product portfolio will aid Tyson Foods to augment its fresh prepared foods offering for both out-of-home and in-home eating occasions. It will also strengthen Tyson Foods’ presence worldwide, alongside catering to its customers efficiently.
Shares of this Zacks Rank #3 (Hold) company has increased 4.5% in the past one month, outperforming the Zacks categorized Food – Meat Products industry’s gain of 2.8%. Notably, the industry is currently placed at top 43% of the Zacks Classified industries (111 out of 256). Also, estimates have been stable in the past seven days.
Key Picks
Better-ranked stocks in the broader Consumer Staples sector include Ollie's Bargain Outlet Holdings, Inc. OLLI, Energizer Holdings, Inc. ENR and Aramark ARMK. All the three stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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