Donnie Smith, Tyson Foods CEO, assesses the value of Tyson's Hillshire acquisition.

BOSTON — During a presentation at the Barclays Back-to-School Consumer Conference on Sept. 4, Donnie Smith, CEO of Tyson Foods Inc., provided an update on the company’s status as well as plans for the future with its latest acquisition, The Hillshire Brands Co. While the details of the deal were being finalized, an integration team was assembled and for several weeks it has been planning how to best assimilate Hillshire with Tyson. One of their first missions was to step back, said Smith, and assess “Who is Tyson 2.0?”

One of the first initiatives was to cherry pick some of the shining stars leading Hillshire’s success and incorporate them strategically into the Tyson’s management team (Read more about some of these key appointments.).

Calling it the “Brady Bunch approach”, Smith said the blending of key personnel from Hillshire with Tyson’s leadership team is integral to its future success. “I feel like we’ve brought the best of both companies together and used the strengths of both companies to help move our business forward.”

Dennis Leatherby, Tyson’s CFO, concurred with Smith’s assessment of the value of Hillshire’s expertise and how, as “a thought leader in marketing and brand development,” the two companies are well positioned to grow as one. He pointed out that Hillshire’s business is 74 percent retail and 26 percent foodservice, which makes for a complementary addition because “Tyson’s Prepared Foods is nearly the opposite,” he said.

The acquisition notwithstanding, Leatherby said for the previous 12 months (ending Aug. 29, 2014), Tyson’s sales were $35 billion, with $2 billion in EBITA. He said the addition of Hillshire should be accretive in 2015 and especially accretive in the following year.

Product innovations such as Tyson Day Starts flatbreads and biscuit sandwiches will join Hillshire's category-leading products.

Continued investment in the form of capital expenditures in current businesses is an ongoing priority. Leatherby said, “We’re very excited about Hillshire, but we’re not going to lose focus on the rest of the company.” He added that additional acquisitions that would grow Tyson’s value-added business and international presence are also priorities. “We are staying focused on our strategy and we won’t forget what got us here,” he continued.

With just a few weeks left in its 2014 fiscal year remaining, Tyson expects to meet its target of $2.78 per share, which would represent more than 20 percent growth over fiscal 2013 (not including costs associated with the Hillshire merger). For the fiscal year, he said revenues should come in between $37 billion and $38 billion, which represents approximately 10 percent growth over the previous year.

In the coming year, Tyson expects chicken margins to meet or exceed 10 percent. Prepared Foods, with the addition of Hillshire should grow significantly, but Leatherby didn’t specify by how much. International performance should improve by about $50 million, he said and sales are expected to top $42 billion in fiscal 2015.

Smith also discussed how Tyson considered growing its prepared-foods business organically vs. acquiring a company like Hillshire and the math made the decision easier. In considering how much Tyson would have to invest in its new retail offerings (including the Tyson Day Starts line in February), Smith said estimates were that the company would have to outspend the category leader by 1.5 times, which translated to about $2.5 billion over approximately five years to achieve a No.3 to No.5 position in the category. He said it made more sense to invest in the No. 1 company “and then link it to the raw materials [via Tyson] and then grow both together.”

Projected synergies between the two companies have been increased in value by Tyson from $300 million to $500 million. Smith says the reasoning behind that increase came after reconsidering efficiencies in the combined companies purchasing, logistics and manufacturing. No doubt, the announced closure of three aging Tyson plants this past July played a part in the amended estimates. He said the production from the three prepared-foods plants would be absorbed by Hillshire plants.