Foster Farms Agrees to Buy Zacky’s Chicken Business
Furthering the consolidation of California’s agriculture sector, Foster Farms, the state’s largest chicken producer, has agreed to purchase the chicken business of its largest rival, El Monte-based Zacky Farms.
The deal would give Livingston-based Foster a dominant position in the poultry aisles of California supermarkets, and analysts expect it to be subject to intense antitrust scrutiny. Terms of the deal between the two privately held companies were not disclosed.
Zacky Farms President Robert Zacky said his family agreed to sell its chicken business, founded 72 years ago, to pay off inheritance taxes his family would soon owe after the death of his brother Al.
“It was a very tough decision,” Zacky said. “It has been a way of life for us. But we knew we’d have to pay those taxes shortly.”
Zacky would remain one of the state’s larger players in the turkey business and a huge feed producer for other businesses in the Central Valley. It would keep its turkey ranches, feed mill and processing plants in Fresno and Stockton and move its corporate headquarters to a new building somewhere near El Monte.
The deal is just the latest in a series of meatpacking mergers, including Smithfield Foods’ purchase of Farmland Foods in Iowa and Tyson Foods’ and Smithfield’s recent bids for beef giant IBP Inc.
The nation’s meatpackers say they need to grow to achieve economies of scale and clout to negotiate with the nation’s top supermarkets. However, economists are concerned that this consolidation would squeeze out smaller producers and affect consumers by driving up prices.
“I think it is a big concern,” said Richard Sexton, an agricultural economist at UC Davis. “My question is: How readily can competition outside the state serve as a brake on the market power of Foster Farms?”
The move would boost Foster’s 750-million-pound annual production by 165 million pounds and add $250 million to its $1 billion in sales.
State agriculture experts say more than half the chicken sold in the state comes from large out-of-state producers such as Tyson and Perdue Farms.
Foster Farms would acquire Zacky Farms’ Fresno-area chicken plant, hatchery, feed mill and 35 production ranches as well as its El Monte distribution center. After the acquisition, those facilities would be integrated and the chicken packaged under the Foster Farms label.
About 1,000 of Zacky’s roughly 3,000 employees would stay on with Zacky’s turkey operation. The rest are hoping to be hired by Foster Farms.
Employees at the El Monte facility have been told that if the Foster deals goes through, they probably would be hired by Foster. However, no one has been guaranteed a job, said Guy Wells, a shipping foreman in the El Monte warehouse, and workers are nervous.
“We’re trying to keep a positive outlook,” Wells said. “It sounds like bad news, but it could be good news and more opportunities there. Most will go with Foster. They are just working that out right now.”
It’s the end of an era for Zacky. Robert Zacky’s father, Sam, a Russian immigrant, started the business in 1928 with a small poultry market. In those days, customers picked out a live bird from a coop, and it was slaughtered and dressed on the spot.
When sons Al and Robert moved in to manage the business in the 1960s, after working on their father’s Van Nuys farm, they transformed it into a wholesale operation and in the 1970s and 1980s acquired the hatcheries, plants and feed mills that helped it become the second-largest chicken producer.
Chicken processing is the backbone of the business, accounting for about $250 million of Zacky’s $350 million in sales last year. But Robert Zacky said he hopes to focus on growing Zacky’s turkey and deli meat businesses, adding more convenience products to its existing lineup of whole and cut-up turkeys, deli meat and hot dogs.
Pending regulatory review, the deal could be completed by the middle of the year, officials said.
