Lakeside Sells to Nilsson Bros. For $107M

[farmers_son]

http://money.cnn.com/news/newsfeeds/articles/apwire/10115044fd5fc49db9971d35f1c8aa30.htm

NEW YORK (Associated Press) - Tyson Foods Inc. said Wednesday it signed a letter of intent to sell its beef processing operations in Canada to XL Foods Inc. for 107 million Canadian dollars ($105.4 million)

Tyson Foods, of Springdale, Ark., said the business no longer fits its long-term international strategy which is focused primarily on Asia, Mexico and South America.

The operations to be sold, the largest beef processing business in Canada, include the packing, feedyard and fertilizer assets of Lakeside Farm Industries Ltd. The business employs 2,300 workers.

XL Foods, part of the Nilsson Bros. Group, said Lakeside complements its existing operations.

The companies expect to close the deal by the end of September. It remains subject to financing, regulatory approvals and a definitive agreement.

[smcgrath76]

You must have read your news minutes before I got to mine.
Awesome. Mandatory everything and now we really have packer concentration. I am pretty sure that if you can read canfax and you account for 1/2 the cattle on the report and there is only 1 other player, you can figure out what they are doing.
107M is a pretty good deal for an existing, fully staffed operation.
I wonder where this leaves - Rancher's Beef, NVF, and XL's plant in Calgary.
Perhaps this opens opportunity for smaller players as XL will now be in the big player part of the game (at least in Canada)?

[wilagro]

A further advance of "vertical integration" for Nilsson Bros. and its various holdings. This is not good news for the farmer/rancher. With its auction marts, feed lots and now an even greater packing plant operation, Nilsson Bros., along with Cargill will call the tune and YOU will do the dance and LIKE IT.

So now the AB government AND the big TWO will effectively control the beef industry in Alberta to an even greater degree than in the past. You guys are TOAST.

[blackjack]

i don't know how many cowcalf producers there are...but i think i resd some where there was 30,000...four thousand bucks each would have had us own a producer owned packing plant...but of course us cats could never figure that out...

[DiamondSCattleCo]

You guys talk as though its too late. Its time that
we spoke to our government and reminded them of
the competition laws in this country. Call your MPs
and your MLAs tomorrow. I know mine will be
getting a phone call. Several in fact.

ABP/SSGA/MSGA/CCA reps, its time to earn your
keep and speak out about this NOW.

Lets make some noise about this, not just go down
moaning and pissing. Get some petitions started.
Lets do something about it. I know we have some
B5ers on here and I'm not sure if you still have any
government ears, but lets use them if you do.

Rod

[DiamondSCattleCo]

The following is the header of the petition that I
will be circulating tomorrow:

Elected representatives, we urge you to stand up
for the residents and cattle producers of Canada.
Our cattle industry currently suffers from a high
degree of concentration in the beef packing
industry. Combined with vertical integration,
environmental factors and high commodity prices in
the grain industry, this concentration has helped to
fuel further depression of fat and cull cattle prices.
The proposed sale of Tyson Foods Inc. beef
production facilities to XL Foods Inc. means that
over 80% of Canadian cattle will effectively be held
captive by two large international packing
companies. This will only result in a less
competitive business atmosphere and make it even
more difficult for a beleaguered cattle industry to
recover in these difficult times.
Therefore, the undersigned request that existing
competition laws be enforced and the sale of Tyson
Foods Inc. beef production facilities NOT be
allowed to proceed.

[DiamondSCattleCo]

Hmmmm, didn't notice that the cut and paste killed
my hard returns. Here's better:

Elected representatives, we urge you to stand up
for the residents and cattle producers of Canada.

Our cattle industry currently suffers from a high
degree of concentration in the beef packing
industry. Combined with vertical integration,
environmental factors and high commodity prices in
the grain industry, this concentration has helped to
fuel further depression of fat and cull cattle prices.

The proposed sale of Tyson Foods Inc. beef
production facilities to XL Foods Inc. means that
over 80% of Canadian cattle will effectively be held
captive by two large international packing
companies. This will only result in a less
competitive business atmosphere and make it even
more difficult for a beleaguered cattle industry to
recover in these difficult times.

Therefore, the undersigned request that existing
competition laws be enforced and the sale of Tyson
Foods Inc. beef production facilities NOT be
allowed to proceed.

[perfecho]

Agreed, my MLA and MP will receive calls tomorrow.
I would gratefully decline my "handouts" for "furthering" our beef industry to the purchase of Lakeside. Then the premiums for age verification (or not), would benefit producers. Even with half of the 300 mil. that is handed out, the balance would take care of purchase and initial operational budgets.
Is it just me, or does anyone else find the timing of the age verification and this sale somewhat uncanny? I must admit, I am cynical of the provinces's relationship with the packing industry, but it would not surprise me.

[grassfarmer]

DiamondSCattleCo, Exactly - does this country even have anti-competition laws? you wouldn't know by seeing them implemented. This should be almost an automatic red light decision in any legitimately governed country concerned about corporate monopoly, price fixing or lack of competition.
Perfecho, I fail to see any possible connection between this announcement and the AMLS announcement of 3 weeks ago.

[farmers_son]

OK. If the sale of Tyson is not allowed to go ahead and Tyson simply closes the plant and moves the equipment to another location, then what? There is nothing in the record of the Competiton Bureau that would suggest the Competition Bureau would not allow this sale to go ahead. Plus this is a sale to a Canadian firm, not nearly as controversial as the recent sale of a major U.S. packer to Brazilian JBS.

While I am sure many factors, such as COOL, would have been involved in Tyson’s decision to sell their only Canadian packing plant and the only cattle feedlot in their asset base I would tend to think the recent move into the United States by Brazilian JBS has shaken up the packing plant industry and caused all the big players to rethink their strategies and where they go forward from here.

This sale does not involve a change in packing plant capacity in this country. And as long as our live cattle prices are determined in the U.S. minus a basis and we have live cattle access to the U.S. I would not expect a noticeable change in the price of our cattle.
Tyson will continue to purchase Canadian live cattle from their U.S operations.

Nilsson Bros rise from owners of an auction in Clyde to a fully integrated multinational player and owner of Canada’s largest packing plant is truly remarkable, a Canadian success story. They started Nilsson Bros. in Clyde in 1988, only 20 years ago. Nilsson Bros. have been very successful at attracting venture capital from players like Manvest Inc. in Calgary. It is very possible that the Alberta Government will be involved in arranging financing for this purchase through AVAC. I would have to say that Nilsson Bros. have seized upon a golden opportunity to purchase Lakeside for what appears to me to be a very reasonable price.

XL Foods already owns packing plants in Edmonton, Calgary, Moose Jaw, Sask., Omaha, Neb. and Nampa, Idaho.

In 2004, Nilsson Bros. (XL) was the only major packer that showed their books to the House of Commons Agricultural Committee. All the rest, including Tyson, refused.

[wd40]

Welcome to FREE ANARCHY. While ag-producers place their individaul short sighted independence above any long term solutions. A bunch of barn cats.

WSGA - playes their fiddles while Rome burns.

[wd40]

Boy FS I'm amazed at how far you have your head in the sand. It's beyond belief.

"Nilsson Bros rise from owners of an auction in Clyde to a fully integrated multinational player and owner of Canada’s largest packing plant is truly remarkable, a Canadian success story."

It's called **** and pillage on the backs of peons.

[smcgrath76]

It is interesting. The Nilsson chunk of the $356 million will certainly be a start on a downpayment.
The price of live cattle is based on US beef - processing cost/margin - basis - countervail (if the AB gov program is countervailed). To the guy selling weaned calves it further includes - cost of gain * x pounds of gain.
While I don't think that nilsson's can directly change the fundamentals of beef supply and demand they are in a unique position of controlling nearly all of the sales facilities in western canada, having access to a large mandatory age verified pool of cattle, and the potential to be operating in a countervailed industry, where they can buy live cattle at countervailed price and sell beef at retail (domestically), while recieving government money for the cows they control and the cattle they have on feed.
I don't disagree with FS that they have seen a meteoric growth in their business. Whether it is a Canadian success story or a success for Canada is a matter of opinion.
Interesting days ahead for sure.

[farmers_son]

Indeed, there was a good deal of raping and pillaging going on in 2003-2004, which was the reason for the previous government's Commons Committee wanting to look into the packers books. But this is 2008. Live cattle access to the North American market has resumed and the short but sweet period of easy packer profits at our expense had come to a end several years ago. I do not think anyone believes the packers are making a killing today. That is clearly indicated by the selling price.

[grassfarmer]

"I do not think anyone believes the packers are making a killing today. That is clearly indicated by the selling price."
Well, yes and no F_S the price may be relatively low but on the other hand Nilssons "meteoric growth" and desire to expand their processing capacity indicates there is still an expectation of profitability - why else would they undertake this purchase?
I guess the money for plant automation in the AMLS can't have been that great afterall if Tyson aren't hanging around to collect it.

Sean, "IF the AB gov program is countervailed" your negative comments are based on the assumption that it will be countervailed. Why? it says in the strategy "Several principles guided the development of this plan" one of which was "Minimize the risk of countervail and WTO actions" Do you have evidence that it will be countervailed ? - the AB Government thinks they have designed something that won't be.

As far as anti-competition petitions go I wouldn't get your hopes up Rod.
I was informed today by someone in the know that "In practice, there are no anti-competition laws in Canada."