Tyson Foods Inc, the biggest U.S. meat processor, said on Monday it would sell its Mexican and Brazilian poultry businesses to bigger global rival JBS SA's Pilgrim's Pride for $575 million.
Tyson also reported a 4.4 percent increase in third-quarter profit and forecast sales for the fiscal year ending September 2015 above Wall Street analysts' estimate. Shares in Tyson jumped 3.1 percent in early trading.
Proceeds from the sale of Tyson's Mexico and Brazil poultry operations will be used to help pay down debt associated with its $7.7 billion acquisition of Hillshire Brands Co, which is expected to close before Sept. 27.
The Mexico and Brazil poultry operations being sold were good businesses for Tyson but lacked "the necessary scale to gain leading share positions," Chief Executive Donnie Smith said on a conference call with analysts.
Tyson in June outbid Pilgrim's Pride with its $63 per share offer for Hillshire, the maker of Jimmy Dean sausages and Ball Park hot dogs, in what would be the biggest deal yet for the global meat business.
Springdale, Arkansas-based Tyson also reported net income of $260 million, or 73 cents per share, for the quarter ended June 28.
Revenue rose 10.9 percent to $9.68 billion from $8.73 billion, helped by higher demand for chicken and pork products.
During the quarter, Tyson's supplies of fully cooked chicken products fell because its existing factories were at capacity and unable to compensate for problems at two plants.
"We've endured long, sizable production shortfalls in one of our highest revenue, most profitable business during a time when high priced beef and pork accelerated the demand for chicken," said Smith, who expects the business to fully recover next fiscal year.
Smith said demand for beef was "robust" during the summer grilling season. That was despite record high prices due to rising feed costs and the shrinking size of the of the U.S. domestic cattle herd, now the smallest since 1951.
Strong demand also helped drive pork prices higher in the latest quarter, Smith said.
The porcine epidemic diarrhea virus (PEDv), which threatens pork supplies because it is deadly to piglets, seemed to have slowed during the warmer months but may reappear during the winter, Smith said.
Tyson forecast 2015 net sales of $42 billion, above the average analyst estimate of $38.75 billion, according to Thomson Reuters I/B/E/S.
Tyson on Friday said it was shuttering three of its U.S. factories that make processed meat products such as sausages and hot dogs.
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.
Tyson's shares rose $1.22 to $40.76 in early trading on the New York Stock Exchange. (Reporting by Lisa Baertlein in Los Angeles and Shailaja Sharma in Bangalore; Editing by Maju Samuel, Saumyadeb Chakrabarty and Meredith Mazzilli)