U.S. meat giant Tyson Foods plans to sell one of the largest beef packing plants in Canada to an Alberta rival.
Saying its Lakeside Farm Industries plant “no longer fits the long-term strategy of our company,” Tyson CEO Richard Bond announced in a release Wednesday that the company will sell Lakeside to XL Foods, owned by Alberta’s Nilsson Bros. Group, for $107 million.
Lakeside, based at Brooks, Alta., about 170 km southeast of Calgary, operates a cattle feeding, slaughtering and processing plant, as well as a fertilizer facility and farm, employing about 2,300 people, processing about 4,700 cattle daily into boxed beef for Canadian and U.S. markets.
XL Foods said in Wednesday’s release that it “plans to continue operating the Lakeside facility after the sale is completed.”
“We believe the Lakeside plant and cattle feeding operation will complement our other beef operations in Alberta and Saskatchewan,” said XL’s co-CEO, Brian Nilsson, in the release. “In addition, it will help strengthen our ability to meet the needs of our North American customer base.”
Cattle feeding and marketing firm Nilsson Bros. entered the packing business in the late 1990s by buying Edmonton Meat Packing and XL Foods. The company’s holdings currently include plants in Edmonton, Calgary and the former Western Canadian Beef Packers plant at Moose Jaw, Sask., which make it Canada’s largest domestically-owned and -operated beef processor. The Nilssons also own beef plants at Omaha, Neb., and Nampa, Idaho.
Pending approval from federal competition watchdogs, the arrangement of “commercially reasonable” financing by the Nilssons and a sealed, definitive agreement by both companies, the two firms said they expect to complete the deal by the end of September.
The deal calls for the Nilssons to pay $57 million on closing of the deal and the remaining $50 million plus interest over a five-year period afterward. Tyson would also keep the finished product inventory, accounts receivables and accounts payables of the Lakeside operations as of the closing date.
“We intend to make the transition of ownership as smooth as possible,” Nilsson said in the release. “At the appropriate time, this will include informational meetings with members of the Lakeside staff.”
Bond said in Wednesday’s release that the international strategy for Arkansas-based Tyson — the world’s largest chicken, beef and pork processing firm, with over 300 facilities worldwide — is now instead focused primarily in Asia, Mexico and South America.
Tyson in April reported that higher costs at Lakeside had “negatively impacted” the company’s second-quarter results. Bond was quoted by Reuters at that time as calling the plant a “major detractor” in Tyson’s beef segment.
Tyson has owned Lakeside since 2001, when it bought U.S. processor IBP, which in turn had bought Lakeside in 1994.