KANSAS CITY, Mo. – When it comes to unexpected major acquisitions, the US meat and poultry industry continues to be full of surprises. Most recently, Hong Kong-based Shuanghui International Holdings Ltd., a majority shareholder of China’s largest meat-processing enterprise, announced it had entered an agreement to acquire Smithfield Foods Inc. for approximately $7.1 billion, including assumption of debt. (Read “China’s largest meat processor acquires Smithfield” in the May 29th edition of meatpoultry.com. for more details). Who saw that coming?
When I first got involved in food trade publishing in the 1980s, I worked on a leading national monthly horizontal food-trade magazine that covered every product category from soup to nuts. The first mega food company acquisition I recall from those early days is when food-giant General Foods was acquired by Philip Morris Companies — now known named Altria Group Inc. — in November 1985 for $5.6 billion. At that time, this was the largest non-oil acquisition ever made in the US. Several years later in December 1988, Philip Morris acquired Kraft Inc., parent company of Oscar Mayer. In 1990, GF and Kraft were combined as Kraft General Foods (KGF). In 1995, General Foods was dropped from the corporate name.
When I began covering the meat and poultry industry in the early 1990’s for vertical trade publications, the major acquisition surprises continued. The following are some of the major industry acquisitions made during the past decade-plus (and a special thanks to The Food Institute for helping me out regarding some of the following acquisitions.) IBP Inc., once known as Iowa Beef Processors Inc., was the largest beef packer and number-two pork processor in the US when it was acquired by Tyson Foods in 2001 for $3.2 billion in cash and stock. Today, the former IBP business is known as Tyson Fresh Meats and is based in Dakota Dunes, SD. Many industry jaws hit the ground when news of this acquisition broke.
In 2006, Butterball turkey business was acquired by Butterball LLC (formerly Carolina Turkeys), a joint venture that was between Smithfield Foods and Maxwell Farms Inc. and affiliate of the Goldsboro Milling Co., for $325 million. Smithfield acquired the other branded packaged meats assets from ConAgra Foods for $246 million. Brands included in the deal were Armour, Butterball, Eckrich, Margherita, Longmont and LunchMakers brands. Seaboard Corp. then bought Smithfield's stake in Butterball in 2010.
During that same year, Groupe Smithfield, the joint venture of Smithfield Foods and Oaktree Capital, completed the acquisition of the European meats business of Sara Lee Corp. for $575 million, plus the assumption of pension-related liabilities. Brands include Aoste, Justin Bridou and Nobre. Smithfield Foods contributed its Jean Caby operations to the joint venture. Groupe Smithfield S.L. is based in Paris. Up until this time, most large meat and poultry acquisitions were largely between US-based companies.
Next came Brazilian meat behemoth JBS SA. In 2007, it acquired Swift & Company, which was the third-largest US beef and pork processor at the time, for $225 million and the acquired business was renamed JBS USA. This move also stunned many in the industry. In 2008, JBS SA acquired Smithfield Foods’ beef business, which was renamed JBS Packerland. On Sept. 16, 2009, JBS announced it had acquired 64 percent of Pilgrim's Pride for a bid of $800 million, making JBS an instant powerhouse in the US chicken industry. Today, JBS SA owns 75.3 percent of Pilgrim's Pride.
And then in April 2013, JBS SA announced plans to complete its acquisition of Brooks, Alberta-based XL Foods' US beef processing operations. When the deal closes, the JBS USA subsidiary of JBS SA will own beef packing plants in Omaha, Neb. and another in Nampa, Idaho. The Omaha and Nampa facilities have a daily processing capacity of 1,100 head of cattle. The Nampa plant is currently idle, and JBS said the company has no immediate plans to re-open the plant.
JBS Food Canada Inc. acquired some XL Food Canadian operations in January this year. JBS Food Canada owns the Brooks XL Lakeside beef processing plant. JBS took over management of the plant in October 2012 following the largest beef recall in Canada’s history. The Lakeside plant has the capacity to process 4,000 head of cattle per day. It is one of Canada’s largest processing facilities and one of the largest employers in southern Alberta, according to JBS. Under the agreement, JBS Foods Canada also acquired a beef packing plant in Calgary, Alta.; a feedlot in Brooks, and the adjacent farmland acreage supporting the feedlot operation.
Early in September 2010, Sigma Alimentos, a leading diversified food processor based in Mexico and a division of ALFA, S.A.B. de C.V., acquired Phoenix-based Bar-S Foods. Armando Garza Sada, chairman of the board for ALFA, said at the time the acquisition would help Sigma to become a meaningful player in the United States refrigerated processed meats market by targeting the US Hispanic market.
“There is a very good ‘fit’ of core competencies and strengths between both legacy companies that have [already] yielded very significant synergies,” says Warren Panico, who was promoted to president and CEO of the new entity created by this acquisition named Bar-S Foods –A Sigma Company — on Jan. 1, 2013.
At the end of 2011, Leucadia National Corp. acquired approximately 79 percent of National Beef Packing Company LLC for $867.9 million. National Beef processes, packages and delivers fresh and frozen beef and beef by-products for sale to customers in the US and international markets. The current owners of National Beef, US Premium Beef LLC, NBPCo Holdings, LLC and Timothy Klein, National Beef’s CEO, continued as minority owners of National Beef after consummation of the transaction. The operations and management structure of National Beef remained unchanged. Leucadia National is a holding company engaged in a variety of businesses.
And now back to the Smithfield acquisition everyone is still talking about. Smithfield’s leader was ecstatic about this turn of events.
“This is an exciting day for Smithfield and Shuanghui,” said C. Larry Pope, Smithfield Foods president and CEO, during a teleconference held shortly after the announcement was made. He explained the acquisition was unanimously approved by the board of directors of both companies.
“[This] will create a leading vertically integrated global pork enterprise and set the global industry standard in food safety, environmental stewardship and animal welfare,” Pope said. “Our board is pleased with the outcome of the process leading to this transaction and we unanimously believe it is in the best interest of Smithfield and its shareholders.
“The combination of Shuanghui and Smithfield makes great strategic sense,” he added. “China is a large and growing market and is already the world’s single-largest, protein-consuming country. In addition, Asia as a whole is a tremendous and growing export opportunity for Smithfield.”
In recent decades, there has been a growing recognition from major marketers that the US meat and poultry industry is just one piece of an increasingly global marketplace. It’s unbelievable how much the US meat and poultry industry has changed in just a little over a decade.
No doubt, the Smithfield acquisition will take some time to sink in and for industry to fully digest. But already, the question in many folks’ minds is….which major US meat and/or poultry company will be acquired next — and by who?
Enhance your industry IQ Sign up for our free newsletters to stay informed on each day’s news and trends |
Subscribe |