Meat&Poultry -- October 2014 - 10

Business Notes

Tyson 2.0: Smith shares plans for the future
During a presentation at the Barclays Back-to-School

especially accretive in the following year. Continued in-

Consumer Conference on Sept. 4, Donnie Smith, CEO

vestment in the form of capital expenditures in current

of Tyson Foods Inc., provided an update on the compa-

businesses is an ongoing priority.

ny's status as well as plans for the future with its latest

Leatherby said, "We're very excited about Hillshire, but

acquisition, The Hillshire Brands Co. While the details

we're not going to lose focus on the rest of the company."

of the deal were being finalized, an integration team was

He added that additional acquisitions that would grow

assembled and for several weeks it has been planning how

Tyson's value-added business and international presence

to best assimilate Hillshire with Ty-

are also priorities. "We are staying focused on our strat-

son. One of their first missions was

egy and we won't forget what got us here," he continued.

to step back, said Smith, and assess
"Who is Tyson 2.0?"

With just a few weeks left in its 2014 fiscal year remaining, Tyson expects to meet its target of $2.78 per share,

One of the first initiatives was

fiscal 2013 (not including costs associated with the Hillshire

stars leading Hillshire's success and

merger). For the fiscal year, he said revenues should come

incorporate them strategically into
Donnie Smith

which would represent more than 20-percent growth over

to cherry-pick some of the shining

in between $37 billion and $38 billion, which represents

Tyson's management team.

approximately 10 percent growth over the previous year.

"During this process, I've had a

"I feel like
we've
brought
together
and used
the strengths
of both
companies
to help
move our
business
forward."

In the coming year, Tyson expects chicken margins to

chance to get to know many people

meet or exceed 10 percent. Prepared Foods, with the addi-

on the Hillshire Brands team and

tion of Hillshire should grow significantly, but Leatherby

the great work they're doing, and

didn't specify by how much. International performance

I'm more convinced than ever that

should improve by about $50 million, he said and sales

the future of our combined compa-

are expected to top $42 billion in fiscal 2015.

nies is bright," Smith said.

Smith also discussed how Tyson considered growing

Calling it the "Brady Bunch

its prepared-foods business organically vs. acquiring a

approach", Smith said the blend-

company like Hillshire and the math made the decision

ing of key personnel from Hillshire

easier. In considering how much Tyson would have to in-

with Tyson's leadership team is in-

vest in its new retail offerings (including the Tyson Day

tegral to its future success. "I feel

Starts line in February), Smith said estimates were that

like we've brought the best of both

the company would have to outspend the category leader

companies together and used the

by 1.5 times, which translated to about $2.5 billion over

strengths of both companies to help

approximately five years to achieve a No.3 to No.5 posi-

move our business forward."

tion in the category.

Dennis Leatherby, Tyson's CFO,

He said it made more sense to invest in the No. 1 com-

concurred with Smith's assessment of the value of Hill-

pany "and then link it to the raw materials [via Tyson] and

shire's expertise and how, as "a thought leader in market-

then grow both together."

ing and brand development," the two companies are well

Projected synergies between the two companies have

positioned to grow as one. He pointed out that Hillshire's

been increased in value by Tyson from $300 million to

business is 74 percent retail and 26 percent foodservice,

$500 million. Smith says the reasoning behind that in-

which makes for a complementary addition because "Ty-

crease came after reconsidering efficiencies in the com-

son's Prepared Foods is nearly the opposite," he said.

bined companies' purchasing, logistics and manufacturing.

The acquisition notwithstanding, Leatherby said for
the previous 12 months (ending Aug. 29, 2014), Tyson's

son plants this past July played a part in the amended es-

sales were $35 billion, with $2 billion in EBITA. He said

timates. He said the production from the three prepared-

the addition of Hillshire should be accretive in 2015 and

No doubt, the announced closure of three aging Ty-

foods plants would be absorbed by Hillshire plants.

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Meat&Poultry -- October 2014

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