Why Tyson Foods is closing three plants, employing 950 workers

Tyson Foods plans to close three factories, one in Iowa, one in New York, and one in New Mexico. Tyson Foods employs some 115,000 people worldwide.

Tyson Foods Inc said it will discontinue operations at three of its factories which make processed meat products such as sausages and hot dogs, affecting about 950 people.

The largest U.S. meat processor, which won the bidding war for Hillshire Brands Co in June, said the closures were not related to the acquisition.

"The closings were under consideration long before our decision to pursue Hillshire Brands", Tyson spokesman Gary Mickelson told Reuters.
Tyson outbid Pilgrim's Pride Corp with its $63 per share offer for Hillshire, valuing the Jimmy Dean sausages maker at $8.55 billion.

As The Christian Science Monitor reported:

Hillshire Brands has been an attractive acquisition prospect for larger companies since it was created as a result of Sara Lee splitting into two companies in 2012. For Tyson,  the deal will mean more established name brands and diversification into the packaged meat industry beyond chicken and other fresh meat products."

The closures were due to changing product needs, an aging Cherokee, Iowa factory and the distance of the Buffalo, New York and Santa Teresa, New Mexico plants from their raw material supply base, the company said on Friday.

"The consolidation helps them get transportation efficiencies," Chris Hurt, an agricultural economist with Purdue University, said.

The number of beef cattle in the United States is at its lowest level in 63 years due to severe droughts, reducing the amount of meat available to process.

The Cherokee factory will close on Sep. 27, while the other two are expected to stop operating in the first half of 2015.

The U.S. Department of Labor's Occupational Safety and Health Administration had cited the Buffalo factory for workplace safety hazards last November and proposed fines of about $122,000.

Tyson contested the citations and settled the case in May, agreeing to pay $105,000 in fines.

The closures will affect 450 employees at Cherokee, 300 at Buffalo and 200 at Santa Teresa. The company had about 115,000 employees as of last September.

Shares of the company, which will report quarterly results on Monday, were little changed at $39.49 in extended trading on Friday. ( Editing by Joyjeet Das)