Chicken company Foster Farms purchased by private-equity firm

Dive Brief:

• Foster Farms has been acquired by Atlas Holdings, the private equity firm said in a statement. The purchase price was not publicly disclosed.
• Atlas also announced that Donnie Smith, the former CEO of Tyson Foods, was named to the same position at Foster. He also has been appointed chairman. 
• Despite higher expenses tied to rising grain prices, poultry companies have reported strong sales growth as consumers continue to load up on the protein even as it has become more expensive at retail. The favorable market conditions have been a major contributor to M&A in the sector.

Dive Insight:

The acquisition of Foster continues what has been an active period of deal-making in the poultry space. 

Cargill and Continental Grain struck a deal in August to acquire Sanderson Farms for $4.53 billion, a transaction that would give it about a 15% share of U.S. chicken production.

Still, despite an optimistic tone by executives at the time that the deal would close in late 2021 or early this year, it remains under review by U.S. regulators concerned about further consolidation in the sector. In a recent filing to 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 also has been grappling with charges of price-fixing among the biggest producers, leading to significant settlements and even some criminal charges. Meanwhile, the Justice Department is moving forward with its prosecution of former and current leaders at Pilgrim’s Pride and Claxton Poultry Farms in a price-fixing case for an unprecedented third time.

The purchase of Foster is different on several fronts. The family-owned company is much smaller, ranking as the 11th largest U.S. chicken producer based on 2021 production figures, according to Watt Poultry USA data.

It’s also being purchased by a private equity firm, so there appears to be no overlap with existing chicken businesses that would draw the ire of antitrust critics. From all accounts, Atlas is likely pouncing on high demand for protein and may see efficiencies it can wrangle from Foster under its ownership.

Doing just that will be made easier by the appointment of Smith.

The industry veteran spent 36 years with Tyson in roles spanning all business functions, according to the release announcing the transaction. He held the position of CEO from 2009 until his retirement in 2016. During that time, Tyson posted record growth, entered new markets and expanded its product offerings, the release noted.

A major driver was moving Tyson further into store-branded offerings, highlighted by the nearly $8 billion purchase of Hillshire Brands, the owner of Jimmy Dean breakfast sausages and Ball Park hot dogs, in 2014. Smith will no doubt be expected to bring some of these same changes to 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 revenues of approximately $3 billion annually, will keep its name.

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

According to its website, Atlas’ only other food company is Wizards Nuts, which operates as Flagstone Foods. The manufacturer 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 tap into the insight it has collected running its other roughly two dozen companies in making changes at Foster.