Tyson Expanding Restaurant Production

Springdale, AR – Tyson Foods has agreed to acquire Keystone  Foods. In a deal valued at $2.16 billion.  That’s billion, with a “b” not million.  According to reports, the deal is aimed to bolster its sales to restaurants.  Especially fast food restaurants.

In a report, in the Wall Street Journal,

Tyson Foods Inc. agreed to aquire a top meat supplier to McDonald’s Corp. and other chains, in a bid to boost its sales to restaurants as rising supplies and tarrifs squeeze U.S. meat companies.

Tyson said Monday it would pay $2.16 billion in cash for Keystone Foods, rxpanding the Springdale, Ark.-based company’s business selling meat to fast-food chains and adding processing plants to it’s network in the U.S. and Asia.

Higher Profits Expected

The report further says that the purchase aims to further shift Tyson’s business toward what the article calls higher-profit products. Those products, are such things as chicken nuggets and fish fillets. Tyson is seeking to get away from the non-branded, commodity meat, the Journal further reported.  Those markets tend to be less profitable and are more prone to market swings.

Bloomberg coverage of this sale, reported, that Tyson doesn’t feel the market will be too concentrated, with one less supplier.  Chief Executive Officer Tom Hayes, told Bloomberg, that Customers that will now be dealing with one combined company can rest assured because the acquisition will mean Tyson has an increased number of plants.

Bloomberg also quoted analysts from Jefferies LLC,

“Strategically we like the merits of the deal given the overlap of the customer base (QSR), value-added product mix and international growth opportunity,” analysts at Jefferies LLC said in a note.

QSR is short speak for Quick Serve Restaurants, otherwise known in the general public as fast food. Those analysts said that Keystone’s low margin profile might be of concern to investors. However,  Jefferies issued a buy rating for Tyson, with a target price of $75.





Disclaimer: Kevin Surbaugh is an independent sales representative of Youngevity (YGYI) and is a shareholder in the publicly traded company.
He also has positions in Coca-Cola (KO), Berkshire-Hathaway (BRK.B); (BRK.A), and WalMart (WMT), but has no positions in any other stocks mentioned, and no plans to initiate any positions within the next 96 hours.

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