Tyson Foods will sell its poultry businesses in Brazil and Mexico to JBS SA and JBS subsidiary Pilgrim’s Pride, the companies announced July 28. The transaction is valued at $575 million and will be paid in cash.

The proposed transaction is expected to be finalized before the end of 2014, and is subject to regulatory approval. JBS and Pilgrim's Pride expect to maintain all the operations working to capacity with the existing workforce and to maintain all labor contracts in both countries.

"Although these are good businesses with great team members, we haven't had the necessary scale to gain leading share positions in these markets," explained Donnie Smith, president and CEO of Tyson Foods.

Tyson’s Mexcian operations to be part of Pilgrim’s Pride Mexico

Tyson’s Mexican operation, known as Tyson de Mexico, will be purchased for an amount of $400 million and will become part of Pilgrim’s Pride Mexico. Tyson de Mexico is a vertically integrated poultry business based in Gomez Palacio in North Central Mexico. It has three plants and employs more than 5,400 team members at its plants, offices and seven distribution centers.

Pilgrim’s Pride Mexico anticipates incremental annual revenue of about $650 million as a result of the transaction.

"Today's announcement demonstrates Pilgrim's continued commitment to our growth strategy of disciplined acquisitions that add company value for our shareholders and strengthen our strategic position in the market," Bill Lovette, Pilgrim’s president and CEO, stated in a press release.

While Tyson Foods is selling its Mexican poultry operations, the company will continue to serve customers in Mexico. The company will supply them with U.S.-produced chicken as well as chicken produced in Mexico, in part through a co-packaging arrangement with Pilgrim's Pride.

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Tyson do Brasil to be acquired by JBS Foods

Tyson Foods’ Brazilian entity, known as Tyson do Brasil, will be sold for the remaining $175 million of the total price of the acquisition. It will be acquired by JBS SA subsidiary JBS Foods.

The Brazilian acquisition represents three fully integrated production plants – two in the state of Santa Catarina and one in the state of Parana. Tyson do Brasil, which has been in existence since 2008, employs 5,000 people and is expected to generate annual revenues of about $350 million for JBS Foods.

Tyson to use proceeds from sale to pay down Hillshire debt, expand in Asia

"In the short term, we'll use the sale proceeds to pay down debt associated with our acquisition of Hillshire Brands,” said Smith.

The proposed acquisition of Hillshire Brands, parent company of brands like Jimmy Dean, State Fair and Ball Park, is valued at $8.55 billion and is expected to close by September 27, the last day of Tyson Foods’ fiscal year. Pilgrim’s had also made two bids to purchase Hillshire, but withdrew its offers after Tyson submitted its $8.55 billion bid.

Longer term, Tyson Foods intends to remain focused on growing its poultry operations in Asia, which include three poultry plants in China and majority ownership of two poultry plants in India. Combined, these Asian operations employ approximately 5,000 people.