© Reuters. FILE PHOTO: The logo of Tyson Foods is seen in Davos, Switzerland, May 22, 2022. REUTERS/Arnd Wiegmann/File Photo
By Kane Wu and Abigail Summerville
HONG KONG/NEW YORK (Reuters) – U.S. meat and processed food maker Tyson Foods (NYSE:) plans to sell its China poultry business, three people with knowledge of the matter said, in the latest case of a multinational firm looking to divest from the country in recent years.
The company has hired Goldman Sachs (NYSE:) to advise on the sale and sent preliminary information to potential buyers including a number of private equity firms, said two of the people, adding the sale process was at an early stage.
While it was not immediately clear what valuation Tyson Foods is seeking for the China poultry business, it has annual sales of about $1.1 billion, one of the people said.
Springdale, Arkansas-based Tyson Foods and Goldman Sachs declined to comment. The sources, who did not say why Tyson was planning to sell the business, declined to be identified because the information was confidential.
Calls to Tyson Foods’ China headquarters in Shanghai went unanswered.
Tyson said this month it was evaluating all operations and closing four more U.S. chicken plants in the latest bid to reduce costs after its third-quarter revenue and profit missed Wall Street expectations.
China’s meat market has become increasingly challenging, with livestock farm margins squeezed in the last two years due to weak demand during the COVID-19 pandemic and increased feed prices because of the Russia-Ukraine war, analysts have said.
A string of multinational firms have divested their China businesses or pared their holdings in the last few years as some found it hard to reap desired profits amid the country’s slower economic growth, strong local competition or geopolitical headwinds, according to bankers.
Foreign companies have divested a combined $8.4 billion of Chinese assets across all sectors so far this year, following $13.5 billion of disposals in 2022, Dealogic data showed.
In the food industry, U.S. agricultural giant Cargill struck a deal in May to sell its China poultry business to private equity firm DCP Capital for an undisclosed price.
British consumer goods maker Reckitt Benckiser Group in 2021 sold its China infant formula and child nutrition business to investment firm Primavera Capital Group for an enterprise value of $2.2 billion.
Dutch dairy cooperative FrieslandCampina kicked off the sale of its Friso infant nutrition brand in December 2021 but has yet to find a buyer. It sold an infant-formula factory in China to local peer Inner Mongolia Yili Industrial Group in July 2022.
Major Chinese feed and meat producer New Hope (OTC:) Liuhe last month told investors it was reviewing its businesses and considering bringing strategic investors in its poultry and food businesses, in a bid to lower its debt-to-asset ratio.
Tyson Foods opened its first factory in China in 2001 and now has four research and development centres, several processing plants and dozens of breeding farms in the country, according to its website for China operations.
It operates throughout the industry chain in China, from breeding and slaughtering to processing and distribution, providing chicken, beef, pork and processed foods.
The company in June launched a new factory focusing on processed foods such as cooked chicken and pre-made Chinese cuisine in the eastern Chinese city of Nantong and another that focuses on frozen and heat-processed foods in the central Chinese city of Xiaogan, the website showed.
Tyson Foods reported $39.5 billion in total sales for the nine months ended July 1, of which $1.9 billion was from the international and other business segment that includes its China operations.
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