US Tyson Foods buys stake in M Flour’s Dindings Poultry
February 15, 2021
Malayan Flour Mills Berhad (MFM) is headed by Teh Wee Chye, 67, the son of the late Teh Liang Teik, who bought the controlling interest in MFM in May 1976 from its founder David L.F.Sung, an industrialist from Hong Kong. MFM is a pioneer in the flour milling industry in Malaysia. The first Prime Minister of Malaysia, the late Tunku Abdul Rahman, officiated the opening of the RM40m modern flour mill at Lumut, Perak on 15 October 1966. MFM was listed on Bursa Malaysia (formerly the Kuala Lumpur Stock Exchange) on 10 July 1968.
Teh Wee Chye, who holds a Bachelor of Science degree in Naval Architect and Marine Engineering and a Master’s degree in Shipbuilding and Shipping Management from Massachusetts Institute of Technology (MIT), USA, was working with Eastern Steamship (S) Pte Ltd when his father called him to leave Singapore to join the family owned flour milling business in Lumut, Perak. Like a filial son, Teh Wee Chye left his shipping dreams behind for the quiet town of Lumut. He has been at the helm of MFM as Managing Director since April 2002. Today, MFM is an integrated food and poultry producer with manufacturing operations in flour milling, grains trading, animal feeds, management of breeder and broiler farms and the downstream processing of poultry products. Its turnover in FY2019 was RM2.68 billion and profit before tax was RM78.3 million.
Teh Wee Chye, with his MIT training, has been Managing Director of MFM for 20 years after taking over the position from his father. But he has been working with his father in the flour milling business since the 1970s. Under Teh Wee Chye’s professional management of the MFM Group, it has become a regional player in the flour milling business and a leading integrated poultry producer in Malaysia. MFM has 2 flour mills in Malaysia, one at Lumut, Perak and the other at Pasir Gudang, Johor (1993). It is engaged in flour milling in Vietnam via its 70% owned Vimaflour Ltd (North Vietnam) and its wholly owned Mekong Flour Mills Ltd (South Vietnam). In Indonesia it has a joint venture with partners Toyota Tsusho Group (Japan) and PT FKS Food and Ingredients (Indonesia) in PT Bungasari Flour Mills which is running at optimum production capacity with potential for expansion. MFM Group sells over 1 million metric tons of flour every year.
MFM ventured into the poultry feed business in 1983. In 1985 it invested in Dindings Poultry Processing Sdn Bhd to produce processed chicken and further processed poultry products from its plant at Sitiawan, Perak. As part of the poultry integration project, Dindings Broiler Breeder Farm Sdn Bhd was established in 1988. It commenced its production of broiler day-old-chicks in 1990. MFM’s poultry businesses are vertically integrated, encompassing feed mills, hatcheries, breeder farms, broiler farms and poultry processing plants. In September 2015 Dindings Poultry Development Centre Sdn Bhd won the 8th Biennial Malaysia Livestock Industry Outstanding Breeder and Broiler Farm Awards during the Livestock Asia 2015 Export & Forum. Dindings Processing facility is halal-certified by Jakim, the Islamic Development Department of Malaysia.
Every year, MFM Group produces approximately 60 million broiler chicken for consumption by Malaysians. It owns one of the biggest closed-house broiler farms in the country, intending to ramp up the capacity to over 100 million by 2023. Since 2010, MFM expanded into the trading of raw material for animal feeds in Malaysia through a 51% owned joint venture company with Toyota Tsusho Corporation Group. In November 2019, MFM commissioned a new state-of-the-art poultry processing plant with a processing capacity of up to 280,000 birds per day.
There is no third generation of the Teh family on the board of MFM group nor in its top senior management which are staffed by professionals. So will the family succession end with Teh Wee Chye?
Entry of Tyson Foods, Inc
The announcement on 10 February 2021 that Tyson Foods, Inc, one of the world’s largest food companies and a recognised leader in protein, has agreed to pay up to RM420million for a minority 49% stake in Dindings Supreme Sdn Bhd which owns the Dindings poultry brand business, led to speculations that perhaps the Teh family is either going to exit the poultry business and focus on its core flour milling business regionally, or the family may just sell out its stake in MFM altogether eventually. With no third generation Teh family member joining the ship and Teh Wee Chye in his late 60s, it will be no surprise if it should happen.
Tyson Foods, Inc listed on the New York Stock Exchange, is helmed by John H.Tyson, grandson of the founder of the 85 year old Tysons group, John W. Tyson. For such a global food conglomerate which has generated US$6 billion in international sales in the recent fiscal year, it is not expected that they would remain a minority shareholder in Dindings Supreme in the long run.
Tyson Foods began expanding its international foot print about 3 years ago with several poultry acquisitions including Keystone Foods in 2018 which has assets in China, South Korea and Malaysia, in addition to 6 US plants. In 2019 it acquired Thai and European operations of Brazil Foods for US$340 million. “It’s estimated that approximately 90% of global protein consumption growth will occur outside the United States, with 60% of the volume growth coming from Asia over the next 5 years,” said Donnie King, who was international president in 2019.
Tyson Foods is already in Malaysia before the announcement of a strategic partnership with MFM. In 2018 Tysons Foods acquired Mac Food Services (M) Sdn Bhd, which has produced and exported halal protein in the country for over 30 years. Tyson Foods Malaysia operates 3 facilities and employs more than 1,500 team members. Their brand, First Pride, can be found in many supermarkets.
With respect to the MFM deal, Tyson said Malaysia’s halal – Muslim practicing – market value is expected to reach $147.4 billion by 2015. The country also exports about $9 billion in halal-certified products annually, according to the Halal Industry Development Corp. “Our global resources and robust innovation capabilities paired with MFM’s more than 30 years of expertise as a leading poultry player in the country, enable both companies to make halal-certified products more readily available and affordable,” said Tan Sun, president of Tyson Foods APAC.
Teh Wee Chye has this to say of the strategic partnership: “Tyson Foods is one of the world’s largest food production companies with a strong global manufacturing and distribution footprint. Malaysia is one of the key poultry markets in Southeast Asia, with a high per capita consumption of poultry. Together with Tyson Foods, we look forward to increasing our halal poultry product offerings in the country, especially in the further processed poultry segment, as well as exporting to demand markets with the help of Tyson Foods’ global network.”
It’s a win-win partnership for both MFM and Tyson Foods.
We will keep track of the success of the partnership.
- Malayan Flour Mills Berhad. PROPOSED STRATEGIC PARTNERSHIP WITH TYSON INTERNATIONAL HOLDING COMPANY ("TYSON" OR "BUYER") IN CONJUNCTION WITH THE PROPOSED DISPOSAL OF 49% EQUITY INTEREST IN DINDINGS SUPREME SDN BHD ("DSSB"), A WHOLLY-OWNED SUBSIDIARY OF MFM, TO TYSON FOR A DISPOSAL CONSIDERATION OF UP TO RM420,000,000 TO BE SATISFIED WHOLLY BY CASH ("PROPOSED STRATEGIC PARTNERSHIP"). https://www.mfm.com.my/investor-relations/bursa-announcements/
- BCT Asia Advisory. 12 September 2017. Malayan Flour Mills Berhad. Company Background. History. https://www.mfm.com.my/wp-content/uploads/BCT-Asia-Sept-2017.pdf
- Malayan Flour Mills Berhad. Annual Report 2019. Directors Profile. Teh Wee Chye. https://www.mfm.com.my/wp-content/uploads/Annual-Report-2019.pdf
- Tyson Foods, Inc. 10 February 2021. Tyson Foods and Malayan Flour Mills Berhad Announce Partnership. Tyson Foods buys a 49% stake in the poultry segment of the Malaysian food manufacturing company. http://www.globenewswire.com/fr/news-release/2021/02/10/2172980/0/en/Tyson-Foods-and-Malayan-Flour-Mills-Berhad-Announce-Partnership.html
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