Tyson, General Mills hit pet-treat deal

Tyson Foods Inc. said Friday that it will sell its pet-treat division to General Mills for $1.2 billion.

The deal, which includes the Nudges, True Chews and Top Chews brands, as well as a production plant in Iowa, is expected to close by the end of September. It is subject to regulatory approval and other customary closing conditions.

Tyson said its meat ingredients will continue to be used for pet-treat manufacturing after General Mills assumes ownership.

The Springdale meatpacker has made pet treats for more than 10 years after debuting its True Chews brand of morsels and jerky.

Despite the company's success in this area, Noelle O'Mara, president of Tyson's prepared-foods unit, said in a written statement that change was in order.

"We believe the time is right to transition these great brands to an established pet foods business where they will complement their existing portfolio," O'Mara said.

Tyson's pet-treats arm generated more than $240 million in net sales in the 12 months that ended April 3.

Pet industry sales soared during the pandemic, exceeding $100 billion for the first time in 2020, as people spent more time at home with their pets, according to the American Pet Products Association. Sales of pet food and treats are expected to grow 5% this year and be bullish through 2022 as more people shop online for their cats and dogs.

Tyson's pet-treat division and the 300 workers involved will transition to General Mills after the sale is completed.

Bethany Quam, General Mills pet-food president, told reporters that the acquisition will strengthen the company's position in a category that only stands to grow.

"We're excited for the opportunity to provide pet parents with more ways to feed and treat their pets like family," Quam said in a news release.

General Mills, known for its cereals, made a big splash when it paid $8 billion for Blue Buffalo Pet Products in 2018, creating a new segment in the process. That risk has since been key for General Mills, which has had strong sustainable sales growth in its pet business.

General Mills is expecting a tax windfall of $225 million when it purchases Tyson's pet-treat unit, resulting in a sales price of roughly $975 million. It plans to make the purchase with cash on hand and short-term borrowing.

Barclays is acting as financial adviser to General Mills and Faegre Drinker Biddle & Reath is serving as legal counsel.

Bank of America Securities is acting as lead financial adviser and Siebert Williams Shank & Co. is acting as financial adviser to Tyson Foods on this transaction.

Tyson shares dipped 22 cents, to close Friday at $80.34 on the New York Stock Exchange.

General Mills shares fell 58 cents to close at $63.40.

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