Trustar, Bain, BPEA EQT target Tyson Foods' China poultry business
US-based meat and processed food maker Tyson Foods has received preliminary bids from private equity firms including Trustar Capital, Bain Capital and BPEA EQT for its China poultry business, according to two sources familiar with the matter.
Hosen Capital, a food-focused private equity firm co-founded by the former number two executive at Chinese agribusiness giant New Hope Group, has also submitted a bid, reported Mergermarket, AVCJ's sister title.
Tyson’s China business generates annual sales of more than USD 1bn. Deliberations are ongoing and the US company could still decide against a deal, the sources said.
China is the world’s second-largest poultry producer after the US, with domestic output reaching 14.3m metric tons in 2022, according to a US Department of Agriculture (USDA) report published at the end of last year.
A surge in white feather broiler prices in 2019 triggered an expansion in upstream production capacity, which led to a demand-supply imbalance and a decline in prices. Even though pricing has stabilised, the USDA noted that China’s poultry producers and slaughterhouses have been operating at a loss since late 2021 and are not operating at full capacity.
One source noted that China’s chicken producers are facing oversupply, and therefore are suffering from a squeeze in profit margins.
Tyson has struggled with profitability this year. It reported back-to-back quarterly losses largely due to pressures in the chicken segment. The company's international/other division posted an operating loss of USD 234m in the third quarter compared to a profit of USD 12m for the same period in 2022.
According to recent financial disclosures, two poultry plants have been closed this year and there are plans to close four more in the US. Donnie King, president and CEO of Tyson, told an analyst call in August that the company will continue to “evaluate everything as we automate and modernise."
Tyson's Asia-Pacific and China-Korea operations include one beef facility, 20 chicken processing facilities, four feed mills and one broiler hatchery, according to its 2022 annual report.
The company established its first factory in China in 2001. Operations span breeding, slaughtering, processing and distribution of chicken, cattle, and pigs, its website states.
There has already been one divestment of a China poultry business by a multinational this year. In May, Cargill announced that it would sell Cargill Protein China to local private equity firm DCP Capital Partners for an undisclosed amount.
Trustar and Bain declined to comment. Tyson, BPEA EQT, and Hosen didn't respond to requests for comment.
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