In fact, the bidder against which Tyson publicly competed, Greeley, Colo.-based Pilgrim's Pride (PPC), earned praise for being disciplined when it walked away from the pricey auction of the refrigerated meats and prepared-foods business.
Yes, the multiple is well above the 14-times EBITDA that Brazilian private-equity firm 3G Capital and Omaha, Neb.-based Berkshire Hathaway (BRK.A) paid for H.J. Heinz in 2013 in a blockbuster $28 billion deal. But it is much less than the eye-popping 23 times EBITDA that Heinz, now a portfolio company of 3G Capital and Berkshire Hathaway, appears to have recently paid for Kraft Foods Group (KRFT) in that $55 billion cash and stock deal.
Moreover, these multiples are for mature, value-oriented, branded food businesses. For growth companies in the food industry, particularly organic and natural-food makers, valuations have rocketed beyond multiples of EBITDA to multiples of revenue.
For example, Deerfield, Ill.-based Mondelez International (MDLZ) acquired Enjoy Life Natural Brands, based in Schiller Park, Ill., for several times its roughly $40 million in revenue, according to an industry source.
And Hershey (HSY), based in Hershey, Pa., acquired gourmet meat snacks company Krave Pure Foods for $315 million, which was about 9 times its $35 million in revenue, according to an industry executive.
A May 5 report issued by Gimme Credit analyst Dave Novosel, noted that Tyson has already achieved $70 million in annual synergies from the deal.