June 26, 2008


Tyson to sell Canadian beef assets


Tyson Foods Inc signed a letter of intent to sell its Canadian beef operations to XL Foods Inc. for CAN$107 million, saying the operation no longer fits with its long-term strategy.


The announcement follows moves by Tyson earlier this year to close three other plants as it struggles to deal with soaring grain costs.


Shares closed Wednesday up 4.3 percent at US$15 and were unchanged after hours.


Under the latest agreement, the world's largest meat producer will sell the packing, feedyard and fertilizer assets of Lakeside Farm Industries Ltd. for CAN$57 million at closing and CAN$50 million, plus interest, over a five-year period.


Lakeside, based in Brooks, Alberta, currently employs 2,300 people and has the capacity to slaughter and process 4,700 cattle a day. XL Foods plans to continue operating the facility after the sale is completed.


The deal is subject to government approvals, financing and the execution of a definitive agreement. Both companies anticipate completing the sale by the end of September.


In April, Tyson swung to a second-quarter loss on restructuring costs, as feed costs continued to plague the company. Under mounting pressure from surging commodity costs, food companies have been jacking up prices, shutting down factories, cutting jobs and shedding less-profitable brands.


Meanwhile, the company is dealing with changes in customer habits amid the weakening economy and their fast-paced lifestyles. Tyson has said consumers have shifted their preferences to ready-to-eat foods from refrigerated products, which prompted its decision to exit from the oven-roasted chicken line. The company has also ramped up its focus on product lines that appeal to consumers wanting to cut down on meal-preparation time.

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