Foster Farms chicken company bought by private equity firm

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Diving brief:

  • Foster Farms was acquired by Atlas Holdings, the private equity firm said in a statement. The purchase price has not been made public.
  • Atlas also announced that Donnie Smith, the former CEO of Tyson Foods, has been named to the same role at Foster. He was also named president.
  • Despite higher spending from higher grain prices, poultry companies saw strong sales growth as consumers continued to stock up on protein, even as it became more expensive at retail. Favorable market conditions have largely contributed to mergers and acquisitions in the sector.

Overview of the dive:

The acquisition of Foster continues what has been an active period of trading in the poultry industry.

Cargill and Continental Grain reached an agreement in August to acquire Sanderson Farms for $4.53 billion, a deal that would give it about 15% of chicken production in the United States.

Yet despite an optimistic tone from executives by the time the deal closes in late 2021 or early this year, it remains under scrutiny by U.S. regulators concerned about further consolidation in the industry. In a recent filing at the Securities and Exchange Commission, Sanderson Farms said it still expects the merger to be completed in the first half of the year.

The poultry industry has also grappled with accusations of price-fixing among larger producers, leading to major settlements and even criminal charges. Meanwhile, the Justice Department continues to prosecute the former and current executives of Pilgrim’s Pride and Claxton Poultry Farms in a price-fixing case for an unprecedented third time.

Buying Foster is different on several fronts. The family business is much smaller, ranking 11th among U.S. chicken farmers based on 2021 production numbers, according to data from Watt Poultry USA.

It’s also being bought by a private equity firm, so there doesn’t appear to be any overlap with existing chicken companies that would draw the ire of antitrust critics. From all accounts, Atlas is likely jumping on high protein demand and can see any efficiencies he can get from Foster under his ownership.

Doing exactly that will be made easier by Smith’s appointment.

The industry veteran spent 36 years with Tyson in roles spanning all business functions, according to the statement announcing the transaction. He served as CEO from 2009 until his retirement in 2016. During that time, Tyson achieved record growth, entered new markets and expanded its product offering, the statement said.

A major driver pushed Tyson further into store brand offerings, highlighted by the nearly $8 billion purchase of Hillshire Brandsthe owner of Jimmy Dean breakfast sausages and Ball Park hot dogs, in 2014. Smith will no doubt be expected to make some of those same changes to the 83-year-old Foster.

With products available nationwide, Foster employs approximately 10,000 people and operates major processing facilities in California, Washington, Louisiana, Oregon and Alabama. Foster Farms, which generates revenue of about $3 billion a year, will retain its name.

Atlas operates in industries as diverse as food manufacturing and distribution, aluminum processing, construction services, power generation, printing and supply chain management.

According to his website, Atlas’ only other food company is Wizards Nuts, which operates as Flagstone Foods. The maker and distributor of private label products sources, processes, packages and distributes nuts, trail mixes and other snacks to retail customers across the U.S. Atlas will likely be able to leverage the information that he collected on the management of his some two dozen other companies in making changes at Foster.

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