Tyson CEO search may take few months

 

It may be a few months before Tyson Foods Inc names a permanent chief executive, the interim CEO of the world's largest meat company said on Thursday.

Candidates from outside the company may be considered, Leland Tollett told Reuters in an email.

"As I've previously said, our goal is to select someone from our existing talent pool. Viable internal candidates continue to be evaluated by the Tyson Board of Directors, which has not ruled out the possibility of considering external candidates," said Tollett.

Tollett had previously said the CEO search could take three months to three years. Tollett has been serving as the interim CEO since early January, when Richard Bond resigned and left the company.

"We are ahead of my expected timetable in restoring our company to where it needs to be financially. Therefore, I believe that a new CEO will be named closer to the front end of my original estimate than the back end, but probably not in the next few months," he said.

THREE LIKELY IN HOUSE CANDIDATES

Tyson has not identified its in-house candidates, but analysts believe Donnie Smith, who oversees chicken and prepared foods; James Lochner, who runs the beef and pork units; and Rick Greubel, who is in charge of Tyson's international business, as favorites.

Smith appears to have the inside track because of his nearly 30 years with the company and having held several positions within the company.

"It is a toss-up between Donnie and Jim. But chicken is too important so if I was to pick one today it would be Donnie," said Akshay Jagdale, food and agribusiness analyst at KeyBanc Capital Markets.

Chicken companies struggled this past year with high feed cost and low meat prices. While many of them reduced production, Tyson was one the last ones to cutback, a move that drew criticism from analysts.

TROUBLE IN CHICKEN MAY BE A FACTOR

The poor results in the chicken unit this past year could hurt Smith's chances and could be the reason the company is taking its time to name a CEO, Jagdale said.

"There is still a lot of work to do on chicken and they are going to need somebody with the ability to execute after Leland is gone. I think Donnie sets up pretty nicely." said another equity analyst, who asked not to be identified.

While Lochner's beef and pork divisions have performed better than chicken lately, his location in Dakota Dunes, South Dakota, and outside of Springdale, Arkansas, may hurt his chances, analysts said.

Tim Ramey, analyst at D.A. Davidson, said Smith and Greubel would be his leading internal candidates.

"I am concerned that Donnie appeared to be the architect of the 'I am not going to cut production strategy,'" said Ramey, referring to Tyson's reluctance last year to cut production.

Lochner was not a strong candidate in Ramey's view.

"When you leave the corporate headquarters and go back to where you came from that usually means you are easing yourself out," said Ramey. "I think Jim Lochner is semi-retired."

Lochner was with Dakota Dunes-based IBP Inc, which Tyson bought in 2001.

Tyson denied that Lochner, 56, is semi-retired and said he puts in considerable time running the beef and pork segments.

Greubel joined Tyson in 2006 after working at Monsanto.

(Reporting by Bob Burgdorfer; Editing by Andre Grenon)Wall Street Journal

P&G's leadership machine

The consumer goods giant has a proven formula to nurture top talent.

 

When Procter & Gamble global business units president Susan Arnold announced in March that she was leaving P&G, the question resurfaced: Who else could possibly replace A.G. Lafley, the company's longtime CEO?

Filling his shoes won't be easy. Since Lafley took the helm at P&G in 2000, he has increased sales 110%, to $84 billion, and nearly tripled profits, to $12 billion. Lafley hasn't yet revealed his succession plan, but he doesn't seem at all worried: "If I get on a plane next week and it goes down, there will be somebody in this seat the next morning," he told Fortune while sitting in his Cincinnati office.

What makes Lafley so confident is a rigorous leadership program called Build From Within. It microscopically tracks the performance of every manager, making sure that he is ready for the next slot. At P&G, says Lafley, each of the top 50 jobs already has three replacement candidates lined up.

One element that helps make the program successful: loyalty. While there's no hard and fast rule against hiring outsiders, P&G rarely does so. "We promote from the inside, because that's our primary source of talent," says Lafley. COO Bob McDonald says employees who are promoted internally nearly always thrive, while other companies, he reckons, have a 50% fail rate when they use headhunters. "What we're talking about is a system that's much more reliable," says McDonald.

Business school grads start at the entry level, which is the main window of opportunity for becoming what's known in the company as a Proctoid (less than 5% of hires come from the outside at a later stage). Once a recruit is admitted - only 2,700 of about 600,000 applicants will make it through the door this year - he chooses a career track based on his goals and the company's needs.

If a talented young brand assistant wants to become, say, a COO, P&G tries to give him as broad an experience as possible. The company might make him the assistant manager of Cascade detergent. Later he'll run laundry products in Canada, before eventually overseeing all of Northeast Asia. (That's an excerpt from COO McDonald's résumé, which reads like a shopping list of P&G products.) "If you train people to work in different countries and businesses, you develop a deep bench," says Moheet Nagrath, head of human resources at P&G.

The company maintains a comprehensive database of its 138,000 employees, a massive constellation whose stars are tracked carefully through monthly and annual talent reviews. In these sessions Proctoids discuss their business goals, their ideal next job, and what they've done to train others. When a position opens, Nagrath can draw up a list of employees who are ready to move immediately to, say, an Eastern European country, complete with their performance reviews. "We can fill a spot in an hour," says Lafley. "That's the beauty of the system."

Cynthia Round, an executive VP at United Way who worked as a brand manager at P&G in the '70s and '80s, agrees that its methods built "well-oiled teams" that could act quickly. However, promoting from within can create an insular culture. Says Round: "There was a sense that you were in a club. The disadvantage was, people did think in similar ways."

Lafley himself oversees the development of the top 150 employees, and McDonald recruits at universities. All executives teach at the training center - which is just steps from Lafley's office - and hold weeklong "colleges" for employees entering new levels.

A willingness to train others ultimately determines who advances: If your direct reports aren't ready, neither are you. "A manager who isn't good at developing others doesn't attract the best talent [to be on his team]," says Nagrath. "Internal reputation is crucial."

And so is that next big promotion.

Written by Mina Kimes/Fortune

Novartis, which sells generic drugs through its Sandoz subsidiary, also has a growing portfolio of cancer drugs that are still protected by patents. The deal highlights a recent trend in the pharmaceutical industry of makers of branded drugs diversifying into health-care areas outside the traditional pharmaceutical business.

The Switzerland-based company will buy the specialty-generics business of closely held Austrian drug maker Ebewe Pharma. With the acquisition, Novartis will now be able to sell several standard chemotherapies. Ebewe's smaller neurological-products business is excluded from the deal.

Ebewe Pharma was a subsidiary of Germany-based BASF SE until 2001, when a group of investors bought it in a management buyout. Ebewe had total sales of €188 million in 2008.

Novartis will finance the deal from existing cash and doesn't expect a change to its credit rating. The transaction is subject to regulatory approval and will probably close this year, Novartis said.

Ebewe Pharma's products are essential components of standard-of-care guidelines for treating many types of cancers, Novartis said.

The acquisition "will further strengthen our pipeline with many planned near-term launches, " said Novartis Chairman and Chief Executive Daniel Vasella.

The deal underlines the drug maker's strategy of offering its customers medicines ranging from inexpensive generics, when available, to branded products. "It is the same customers -- hospitals -- that are buying the branded drugs and the generics," Mr. Vasella said in a telephone interview.

The use of less-expensive generics for standard treatments helps preserve cash that can be redeployed to be used on treatment with newer, more effective drugs, which are also more expensive, Mr. Vasella said.

The global market for generic cancer drugs was valued at about $3.5 billion in 2008. It will probably grow significantly in coming years, given that drugs with combined sales of $9 billion annually will lose patent protection by 2015.

Analysts welcomed the acquisition as a complementary fit to Novartis's existing businesses and said the price, though high, was fair. Still, some warned that drug companies' appetite for generic drugs will dent their profitability.

The Novartis deal follows GlaxoSmithKline PLC's recent acquisition of a 16% stake in African generic drug maker Aspen Pharmacare Holdings Ltd. and Sanofi-Aventis SA's takeover of Czech generics company Zentiva.

"Although the diversification into generic drugs reduces the risk inherent in the overall health-care business away from pharmaceuticals, boosts growing sales in emerging markets and potentially capitalizes on the patent cliff in 2011-12, it tends to affect adversely an innovative drug maker's profitability and cash flow generation," said Britta Holt, an analyst for the pharmaceutical sector at rating agency Fitch Ratings Inc.

Tate & Lyle Names Reckitt Benckiser’s Javed Ahmed as New CEO

U.K. sugar and food-ingredients producer Tate & Lyle PLC Tuesday named Reckitt Benckiser PLC's Javed Ahmed to succeed its embattled Chief Executive Iain Ferguson.

Mr. Ferguson -- who joined as Chief Executive from Unilever PLC in 2003 -- will stay on in his role until Mr. Ahmed joins the company between now and Nov. 15, the company said.

Mr. Ahmed is currently executive vice president for Reckitt's Europe division, having held a number of senior roles within Reckitt over the last 17 years in Europe and North America. He has been a member of the Reckitt Benckiser Executive Committee since 2003.

"We are confident that, in Javed, we have found a worthy successor to lead Tate & Lyle in the next phase of its development," Tate & Lyle's chairman David Lees said.

Shore Capital analyst Clive Black said Mr. Ahmed looked a "good catch" -- at least on paper.

"Reckitt's a fantastic corporate stable," he said, "he wouldn't be in such a position if he wasn't a competent operator."

The market agreed, sending Tate & Lyle shares up nearly 10% in a broadly higher London market.

The stock -- which traded at around 300 pence a share when Mr. Ferguson joined in May 2003 -- rose to more than 820 pence by the end of 2006, only to fall back below 300 pence earlier this year.

Mr. Ferguson's imminent departure has been rumored for a number of weeks, after a torrid couple of years for the company in which it issued a series of profit warnings and disappointing results.

Earlier this month, press reports suggested a mystery activist investor was looking to shake up Tate & Lyle's management team after building a sizable stake in the company through equity derivative contracts. Tate & Lyle has so far remained tightlipped on the speculation.

Chairman Lees is already set to leave later this year -- to be replaced by Peter Gershon, while Finance Director John Nicholas departed in September 2008.

Shore's Mr. Black said Mr. Ahmed was joining a "very difficult corporate vehicle, which suffers from "perennial volatility."

While Mr. Ferguson, the outgoing CEO, tried to halt this pattern with his "value added" strategy, the results were mixed.

"It was probably time for a fresh pair of eyes," said Mr. Black.

The company has issued two profit warnings already this year, citing reduced demand for sugar, sweeteners and industrial ingredients. It has also postponed the startup of its new ethanol plant at Fort Dodge, Iowa, until market conditions improve.

Last month, the company suffered a further setback when a U.S. court ruling on its Sucralose patents left its key artificial sweetener exposed to low-cost generic imports.

Sucralose -- which trades under the name Splenda -- had been the key plank in Mr. Ferguson's project to turn Tate & Lyle into a "value added" food company rather than a food-commodities business.

While Sucralose accounts for only 4% of Tate & Lyle's sales, its strong margins means it makes up 21% of the group's profit. Tate & Lyle's traditional businesses -- producing sugar and industrial ingredients -- have far lower margins and are more susceptible to the vagaries of global commodity pricing.

Energizer Holdings acquires S.C. Johnson shave business

Energizer Holdings is expanding its shave business by acquiring from S.C. Johnson & Son the Edge and Skintimate brands for $275 million.

"We are very exciting about combining the Edge and Skintimate brands with our Schick-Wilkinson Sword shaving business, strengthening both in the process," stated Ward Klein, CEO. "As leading brands in the U.S. men's and women's shave preparation category, Edge and Skintimate are a logical and attractive adjacency for our shaving business."

Under certain circumstances, Energizer may elect to issue to S.C. Johnson, in lieu of cash payment of the purchase price, shares on non-voting redeemable preferred stock, with a liquidation preference of $310 million, and semi-annual dividends.

The acquisition is subject to customary conditions and regulatory approval.

Mike Mitchell, US: Nestle USA Sales Exec to Lead Dryer’s

Mike Mitchell, president of sales for Nestle USA, is to take the helm at local unit Dreyer's Grand Ice Cream.

Mitchell becomes president and CEO and replaces Timothy Kahn, who is retiring from the position of CEO of Dreyer's, which has been owned by Nestle since 2006.

As president of sales for Nestle USA since 2002, Mitchell was responsible for all retail sales for supermarkets, mass merchandising, discounters, club stores, drug stores and military.

Prior to that, he was president/general manager of the beverage division of Nestle USA, responsible for overseeing the entire beverage operation in the US including the Coffee-mate, Nesquik, Nescafe, and Juicy Juice brands.

In 1995, Mitchell moved to Nestle Food Services as senior vice president, sales. In 1998, he added marketing responsibilities to his role as senior vice president, sales and marketing.

In 2000, Mitchell became senior vice president of marketing to create a stronger focus on strategic development and long-term growth.

J.M. Smucker announces new corporate officers and promotions

Mayer, currently a corporate officer and VP customer development, was promoted to the position of VP sales, grocery market, effective June 1. Mayer has been with the company for 29 years and has held a number of roles within the company, including district sales manager, Florida; regional sales manager, Southern region; and director customer development. Mayer succeeds Don Hurrle who is retiring June 30, 2009, after more than 33 years with the company.

Knudsen joined the company in 2002 and has been the company's acquisition and securities counsel and assistant secretary since 2007. Knudsen succeeds M. Ann Harlan as corporate secretary, a position Harlan has held since 2003. Harlan will continue to serve as VP and general counsel.

Glaxo to Buy Stiefel for $2.9 Billion

GlaxoSmithKline PLC agreed to acquire Stiefel Laboratories Inc. for about $2.9 billion in a deal that continues a wave of acquisitions in the drug industry.

Closely held Stiefel, a U.S. maker of dermatology products, is part-owned by buyout firm Blackstone Group. An auction of the company drew interest from several major global drug companies, including Sanofi-Aventis SA, after Stiefel was put up for sale earlier this year.

Glaxo will also assume about $400 million in Stiefel's debt. A potential further $300 million cash payment is contingent on future performance, Glaxo said.

The deal the latest in a wave of takeovers among big pharmaceutical companies, which are looking for new sources of sales growth as some of their biggest drugs face competition from cheaper generics.

Stiefel products treat a wide range of skin ailments. The company makes treatments such as the DUAC acne gel and OLUX, an anti-itch foam for the scalp. The company has been controlled for more than 160 years by the founding Stiefel family. It has expanded in recent years through a string of acquisitions, including the roughly $600 million purchase of Connetics Corp. in 2006. Blackstone invested $500 million in Stiefel in 2007 for a large minority stake.

Now based in Coral Gables, Fla., Stiefel was founded in Germany as a maker of medicated soap. It has annual sales of roughly $1 billion and 4,000 employees and calls itself the largest independent dermatology company in the world. Other details about its financial performance aren't available.

Included in this year's pharmaceutical megadeals are Pfizer Inc.'s pending $68 billion acquisition of Wyeth and Merck & Co.'s agreement to buy Schering-Plough Corp. for $41 billion. Glaxo Chief Executive Andrew Witty has signaled a lack of interest in such blockbuster deals. But that doesn't mean the company isn't in deal-making mode.

Just last week, Glaxo struck an alliance with Pfizer to create a new company combining their HIV businesses. That deal is expected to give Glaxo access to Pfizer's more-promising profile of AIDS drugs in development, and provide opportunities for cutting costs. Glaxo will initially own 85% of the venture, which could be valued at more than £4 billion ($5.92 billion).

Though a number of big pharmaceutical CEOs have sworn off megadeals, many of them are actively looking for smaller acquisitions. Aiding the drug companies' ability to do deals has been a friendly fund-raising environment, with bond investors eager to lend to the biggest names in the industry, which are considered defensive bets in a worsening economy. The combination of large and small deals in the works has made the drug sector a bright spot in an otherwise dismal global takeover climate.

For Blackstone, the deal would represent a positive development in a difficult market for private-equity firms, which have been constrained in their ability to sell investments by the depressed merger and IPO markets. What's more, most deals struck in 2007, at the height of the leveraged-buyout craze, are deeply under water for the private-equity firms.

It's unclear how big of a profit Blackstone could make on the Stiefel deal.

Lazard Ltd. is advising Glaxo on the Stiefel deal, with Blackstone bankers advising the sellers.

As reported in the Wall Street Journal by By Dana Cimilluca and Jeanne Whelan

Pepsi Bids $6 Billion for Largest Bottlers

PepsiCo Inc. launched a $6 billion takeover bid for its two largest independent bottlers late Sunday, a major strategy shift that signals the company's intention to overhaul how it makes and distributes its products to consumers.

The simultaneous offers for Pepsi Bottling Group Inc. and PepsiAmericas Inc. value each company's shares at about 17% above their trading price Friday. PepsiCo is offering $29.50 in cash and stock for each share of Pepsi Bottling, valuing the company at about $6.4 billion. It is making a separate offer for PepsiAmericas, at $23.27 per share, that values that bottler at about $2.9 billion.

Pepsi already owns one-third of Somers, N.Y.-based Pepsi Bottling and over two-fifths of Minneapolis-based PepsiAmericas. Pepsi said it intended its offers to be friendly, and had to reveal them publicly because of Securities and Exchange Commission rules. The bottlers will likely convene independent committees that do not include PepsiCo's board representatives to evaluate the bids.

The offers show that even during a global recession, the world's best-capitalized corporations still have the wherewithal to pursue mergers. Shareholders of the two bottlers will have to decide how hard to press for higher prices in the midst of a shaky stock market.

A decade ago, Pepsi sought to separate itself from its bottlers, figuring it would help the company focus on soft-drink growth while keeping bottling assets off its balance sheet. In an interview, Pepsi Chairman and Chief Executive Indra Nooyi said business conditions had changed significantly since then. Consumers are abandoning soft drinks for water, juice and other noncarbonated beverages.

Owning the two big bottlers would give Pepsi control over how it distributes its beverages, allowing it to revamp production and distribution and squeeze out costs. "We can accelerate revenue growth and be more agile and flexible," she said of the offer. "When you have a flat-to-shrinking profit pool, slicing it 20 ways to Sunday is not the answer."

Combining Pepsi with its two main bottlers would give Pepsi control of about 80% of its North America beverage distribution volume. The company also said it expects to save $200 million through synergies, and expects to boost annual earnings by 15 cents a share once those synergies are fully realized.

The offers are the most aggressive moves by Ms. Nooyi since she became head of the drinks and snack-food giant in 2006. She has become increasingly convinced that a major revamp of the distribution system was needed, saying in a published interview last October that it needed to be "reconceptualized."

Pepsi is being squeezed by broader changes in consumer habits. U.S. soft-drink sales slid 3% last year, the fourth annual decline in a row and the steepest on record, according to industry publication Beverage Digest. At the same time, the recession led to the first annual decline in decades in sales of nonalcoholic beverages overall, including water, juice, and other drinks.

These changes have put pressure on bottlers. Their manufacturing assets are geared mostly toward producing soda rather than the types of drinks that are growing now, such as "enhanced water," which is bottled water with vitamins and flavors.

Pepsi owns and markets its brands. Its bottlers manufacture, distribute and sell them. Pepsi and its bottlers have had their share of disagreements. Its bottlers have long sought greater access to Gatorade, one of the crown jewels of Pepsi's beverage business. But the drink is manufactured using a different process than the one bottlers use to make soda, and it is distributed through warehouses, as it was before Pepsi acquired it.

Late last year, to the dismay of PepsiCo, Pepsi Bottling began distribution of Crush sodas, made by rival Dr Pepper Snapple Group Inc. and a stronger brand than Pepsi's fruit-soda offerings.

The concept of the big publicly traded bottler was forged by Coca-Cola Co. in the late 1980s. Worried about losing control over its bottlers, the company's chief financial officer at the time, M. Douglas Ivester, devised a plan to create "anchor bottlers" in which it would own a large stake -- up to 49% -- while keeping the bottlers' assets off its books.

The new system worked wonders for Coke, which used it to build a network of powerful anchor bottlers around the world, and to generate an additional profit stream by buying up small bottlers and then selling them to the new anchor bottlers. But by the late 1990s, the big bottlers were also causing problems for Coke, as they became saddled with debt from acquiring new territories and equipment.

PepsiCo spun off its bottling division in 1999, under pressure from investors. The initial public offering of Pepsi Bottling, or PBG, was one of the largest in the history of the New York Stock Exchange. Today PBG is the world's largest bottler of Pepsi beverages, accounting for about 40% of Pepsi's global volume and more than 50% of Pepsi beverages sold in North America.

Pepsi and PBG have remained closely intertwined. PepsiCo owned 33.1% of PBG stock as of Feb. 13, according to PBG's proxy filing with the SEC. PBG Chief Executive Officer Eric J. Foss worked for Pepsi's bottling arm before the spinoff. He has been with Pepsi Bottling Group since its formation, and took over as CEO in July 2006. Two PepsiCo executives sit on PBG's board -- John C. Compton, head of PepsiCo Americas Foods, and Cynthia M. Trudell, chief personnel officer and a former director of PepsiCo.

Pepsi's second-largest bottler, PepsiAmericas Inc. became a major player in 2000, when Whitman Corp. agreed to buy the smaller PepsiAmericas Inc. Chief Executive Robert C. Pohlad has led the company since the merger. PepsiAmericas has $4.9 billion in annual revenue and accounts for about 19% of Pepsi products sold in the U.S.

PepsiCo's move is likely to put pressure on Coke, which is grappling with its own decline in U.S. soda sales and has had a fractious relationship with its biggest bottler, Coca-Cola Enterprises Inc. Coke too is aggressively developing its presence in noncarbonated beverages, which don't always fit well with a bottling business.

PepsiAmericas, which has a history as an independent company, operates under a shareholder agreement that restricts the amount of shares PepsiCo can own. According to PepsiAmericas' proxy filing, any acquisition by PepsiCo that would put the company over a threshold of 49% of the outstanding common stock must have the approval of a majority of directors not affiliated with PepsiCo, the approval of shareholders not affiliated with PepsiCo, or meet criteria setting a minimum price.

PepsiAmericas's Mr. Pohlad is the second-largest shareholder after PepsiCo, with 10.4% of the company's common stock. The shareholder agreement specifies that PepsiCo may not enter an agreement with Mr. Pohlad that would enable the company to surpass the threshold.

Centerview Partners, Banc of America Securities and Merrill Lynch are financial adviser to PepsiCo. Davis Polk & Wardwell is legal counsel.

As reported in the Wall Street Journal By Betsy MCKAY, DENNIS K. BERMAN and VALERIE BAUERLEIN

Campbell Soup by artisan breadmaker Ecce Panis

 

Campbell Soup Co. said late Thursday it has acquired a New Jersey maker of artisan breads.

Ecce Panis Inc. of East Brunswick, N.J., will be folded into Campbell’s Pepperidge Farm bakery operations.

 

Terms of the deal were not disclosed.

Campbell’s (NYSE: CPB) said buying Ecce Panis was part of a larger plan to grow through “strategic acquisitions and outside partnerships.”

“Artisan bread represents one of the fastest-growing segments of the bakery category, and I am confident that we can leverage our sales and marketing capabilities to expand the availability of Ecce Panis products and complement our existing bakery business,” said Douglas Conant, president and CEO of Campbell’s.

The company makes handcrafted, stone-baked breads sold primarily through in-store bakeries at retail stores and supermarkets.

Ecce Panis, which was founded in 1988, has 115 employees in 113,000-square-foot baking facility in East Brunswick.

The Ecce Panis name will continue to be used.

Campbell Soup, which is based in Camden, N.J., sells products under Pepperidge Farm, Arnott’s, V8, Pace and the flagship Campbell’s name.

As reported in the Philadelphia Business Journal