A subsidiary of Tyson Foods has agreed to acquire Oaktree Capital-backed prepared foods provider AdvancePierre for $4.1 billion, a combination of equity and the assumption of debt, the Arkansas-based food giant announced Tuesday.
According to the statement, the deal calls for all outstanding shares of AdvancePierre, which listed on the New York Stock Exchange in July at $21 per share, to be acquired by an unnamed Tyson subsidiary for a total of $3.2 billion, or $40.25 per share, through a tender offer. In addition, Tyson agreed to assume $1.1 billion in AdvancePierre debt.
Headquartered in Cincinnati, Ohio, AdvancePierre produces and distributes value-added protein products and handheld convenience items through foodservice, retail, convenience store and vending channels. The company maintains 11 manufacturing facilities in the US and its products include packaged sandwiches, cooked hamburgers, country-fried steaks and others.
Tyson said the deal will result in $200 million in cost savings over the next three years.
“Cost synergies will be created by a consolidated manufacturing footprint, procurement efficiencies, distribution network consolidation, and addressing redundant sales and marketing functions and duplicative corporate overhead,” according to the statement.
Funds associated with Oaktree currently own approximately 42 percent of AdvancePierre’s outstanding stock and have agreed to tender those shares pursuant to the agreement.
Oaktree made an investment of approximately $100 million to buy AdvancePierre’s debt in 2008, using capital from its OCM Principal Opportunities Fund IV, which closed on $3.3 billion that year, according to a market source familiar with the investment.
After the debt was converted to equity through a bankruptcy process, Oaktree’s Global Principal Group (since been rebranded as the Special Situations Group) replaced AdvancePierre’s entire management team, the source said, pursuing acquisitions and other changes which helped expand revenues from about $500 million in 2008 to $1.6 billion last year.
Discussing the AdvancePierre investment on Oaktree’s second quarter conference call last July, co-chairman and chief investment officer Bruce Karsh highlighted the fact that the initial public offering took place amid post-Brexit volatility and said it was a demonstration of the firm’s overall strengths.
“While the profitability of this particular investment makes it extraordinary, in our experience, the process and approach we used – or the Global Principal Group used – are typical, and serve as excellent example of how our distress-oriented investment teams do their work,” he said at the time.