U.S. meat and processed food producer, Tyson Foods (TSN.N), is reportedly considering the sale of its poultry business in China, according to sources familiar with the matter. The company has enlisted the services of investment bank Goldman Sachs (GS.N) to advise on the potential sale. Preliminary information has been shared with potential buyers, including private equity firms. However, the sale process is still in its early stages and specific details about the valuation sought by Tyson Foods remain undisclosed.
The China poultry business of Tyson Foods generates annual sales of approximately $1.1 billion. While the company and Goldman Sachs have declined to comment on the matter, sources close to the situation indicate that the decision to sell has been prompted by a reevaluation of its operations. Tyson Foods has been looking to reduce costs after its third-quarter revenue and profit fell short of expectations, leading to the closure of four U.S. chicken plants.
China’s meat market has posed challenges for multinational companies due to factors such as weak demand during the COVID-19 pandemic and increased feed prices caused by geopolitical tensions like the Russia-Ukraine conflict. As a result, several foreign firms have divested from or scaled down their Chinese operations in recent years. This trend is reflected in the data from Dealogic, which shows that foreign companies have divested around $8.4 billion of Chinese assets across various sectors in the current year.
The food industry has also seen similar moves. U.S. agricultural giant Cargill, for instance, sold its China poultry business to private equity firm DCP Capital earlier in the year. Other companies, like British consumer goods maker Reckitt Benckiser Group and Dutch dairy cooperative FrieslandCampina, have made similar divestitures in the past.
Tyson Foods initially entered the Chinese market in 2001 and has since established a significant presence, operating across the entire industry chain from breeding and slaughtering to processing and distribution. The company’s China operations include multiple research and development centers, processing plants, and breeding farms. However, the challenging market conditions have led Tyson Foods to explore the possibility of divesting from its China poultry business as part of its broader operational evaluation strategy.
