Tulip, the UK’s biggest pork producer, has been sold to Brazilian-owned food giant Pilgrim’s Pride Corporation for £290 million ($354m).
Pilgrim’s, which employs more than 51,400 people and operates chicken processing and prepared foods facilities in 14 US states, Puerto Rico, Mexico, the UK and continental Europe, has signed a contract to acquire the struggling pork processor from Danish Crown. It already has a strong presence in the UK poultry sector, owning Northern Ireland-based Moy Park. The company’s website boasts that ‘nearly 1 out of every 5 chickens in the US comes from Pilgrim’s’.
Although its headquarters are in the US, for the past decade, it has been owned by Brazilian company JBS, one of the biggest meat manufacturers in the world.
Pilgrim said the the transaction solidifies its position as a leading European food company, creating one of the largest integrated prepared foods businesses in the UK with a portfolio of brands and retail private label solutions.
The transaction, unanimously approved by Pilgrim’s Board of Directors, was funded ‘with cash on hand’. The purchase amount represents 5.4 times implied expected EBITDA.
“We are pleased to strengthen our European foods platform with the acquisition of Tulip Limited, which positions Pilgrim’s as a leading global prepared foods player,” Jayson Penn, Pilgrim’s global chief executive officer, said.
“The transaction represents the logical next step in our evolution to expand our geographical footprint, enhance our value-added portfolio and reduce volatility across our business with a more stable margin profile. Tulip Limited’s integrated production platform, consumer ready innovation capabilities, well-invested assets, established customer relationships and strong leadership team will solidify Pilgrim’s platform for growth in the attractive UK market.”
He welcomed ‘the talented Tulip Limited team members and management team’, led by Andrew Cracknell, to the Pilgrim’s family. “We look forward to working together to drive growth and deliver value for our stakeholders,” he said.
Mr Cracknell, who was appointed as Tulip CEO last autumn to oversee a ‘major transformation’ of the business, said: “Pilgrim’s is acquiring an industry-leading farming operation, a strong team of dedicated people and a network of well-invested manufacturing sites.
“Our companies share a rich heritage in agriculture and food production with aligned values that put people and customers at the heart of all we do. The Tulip Limited leadership team and I look forward to working with our new colleagues to build upon the fantastic progress made within the business and realise our combined growth opportunities as we enter an exciting new phase.”
Tulip, with an integrated supply chain, is the largest pig producer in the UK, owning many pig farms and operating 12 production facilities throughout the UK, with nearly £1 billion in annual sales and more than 6,000 members of staff.
Danish Crown said Tulip, its UK arm, was ‘dragging down’ its results in November, after Tulip posted a loss of £31 in 2017/18, following on from a £27m loss the previous year. This prompted an ongoing cost-cutting exercise at the UK pork processor.
Under terms of the agreement, Danish Crown will continue to supply Danish pork to Tulip under a long-term supply agreement.
Jais Valeur,Danish Crown, Group CEO, said: “Pilgrim’s is already strongly positioned within the UK chicken market and would like to strengthen its position within the market for pork. On our part, we want to simplify our UK business. Going forward we will supply Danish pork to Pilgrim’s, so all in all the transaction holds out interesting perspectives for both parties.”
Pilgrim’s said it believes that its strong cash flow generation and the additional cash flow resulting from the acquisition will allow it to maintain its strong credit profile, while providing ample free cash flow for delivering and facilitating further strategic acquisitions.