Wednesday, May 16, 2018
In a move to match its sustainability goals, Tyson Foods said Tuesday that it will spend $850 million to acquire poultry rendering and blending facilities that will expand the meatpacker's pet-food and animal-feed capacity.
The pending acquisition of American Proteins Inc. in Georgia and its subsidiary AMPRO gives Tyson the equipment and manpower to turn more animal parts into oils and fats used in animal feed, pet food and aquaculture products, and to expand its animal-feed ingredient business.
Parent company American Proteins has agreed to Tyson's terms. The agreement is subject to standard closing conditions and regulatory approval.
Once the ink has dried, Tyson will own four rendering plants in Georgia and Alabama and 13 blending facilities in Midwestern and Southeastern states. About 700 employees work for privately held American Proteins. According to the news release, "most" will transition to Tyson.
"This acquisition is a great complement to our existing business, gives us the ability to render raw materials in a region we don't currently serve, and better positions us to meet the competitive, fast-growing national and global demand for animal protein," Doug Ramsey, Tyson's group president of poultry, said in a statement.
Rendering is the process of cooking and drying animal parts once the meat for human consumption is removed.
The process, according to the National Renderers Association, is "environmentally friendly" because it cuts the amount of animal products sent to landfills and reduces greenhouse-gas emissions. According to the association, rendering plants have the same effect on greenhouse emissions as removing about 12 million cars from the road.
The acquisition is appealing to Tom Hayes, Tyson's president and chief executive officer, because it grows the business and helps achieve its sustainability goals set earlier this year. One of those goals is to reduce greenhouse-gas emissions 30 percent by 2030. Another is to implement better farm practices on 2 million acres of corn by the end of 2020.
"Through this important business, no part of the animal goes to waste, and we can recycle valuable ingredients into feed for pets and aquaculture," Hayes said in a statement.
Over the next 12 months, the acquisition should generate adjusted net sales of more than $550 million, according to Tyson. In time Tyson expects fiscal benefits from the acquisition's distribution network and manufacturing operations.
The decision to invest in "relatively small" rendering operations reminded Ken Shea, Bloomberg Intelligence's senior food and beverage analyst, of Coca-Cola's recent investments in plastics recycling. Comparing the two companies, he said both are following plans shareholders may classify as "earnings dilutive" because they think it's an important thing to do as a corporate citizen.
"As several studies have shown, consumers are increasingly incorporating sustainability practices into their purchasing choices," Shea said.
In addition to sustainability reasons, it's more cost-effective, said Mervin Jebaraj, director of the center for business and economic research at the University of Arkansas, Fayetteville.
"Landfill use costs in the U.S. have increased even as the volume of waste being routed to landfills is growing slowly," Jebaraj said.
Another aspect to consider is increasing demand in the pet-food sector. Jebaraj said millennials show some of the highest pet ownership in the country and "shower financial attention" on these pets often seen as "starter children."
Business on 05/16/2018
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