September 5, 2008

Tyson Foods Inc announced Thursday (September 4, 2008) it is issuing stocks and convertible notes in an effort to raise between US$700 million and US$800 million to repay outstanding debt and to make possible acquisitions.

Tyson, one of the largest US meat companies, said it plans to sell 20 million shares of its Class A stock and sell US$450 million of convertible notes that will carry the option of being converted into common stock at a later date. 

Once completed, the stock offering will boost the company's Class A shares outstanding by 7 percent. 

Even though Tyson has been beset by higher grain costs this year, analysts said the company has plenty of cash in the kitty and is not likely to use the funds it would be raising for grain or fuel purchases alone.

"After many years of talking about acquisitions, we think Tyson is ready to pull the trigger on a more consistent basis," wrote BMO Capital Markets analyst Kenneth Zaslow. 

In fact, Tyson has already dropped a hint of what is to come when it entered into joint ventures in both China and India. It also bought a controlling stake in Shandong Xinchang Group, a Chinese poultry supplier recently.

The company may also target small US chicken producer or chicken plant as operations in this category would be experiencing the greatest pain from higher operational costs, analysts added.

Although no date has been set for the sale of the stocks and convertible notes, it was understood that both offerings will be conducted separately and would not be contingent on each other. In the stock sale, an entity controlled by former chairman Don Tyson will purchase 3 million shares. 

J.P. Morgan and Merrill Lynch are underwriters for the offerings.

Tyson shares fell almost 8 percent to US$14 in midday trading.