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Brokers question exit of Tyson Foods' 'best-ever' CEO

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Tyson Foods defended as "excellent" the timing of its change of boss, after questions by analysts over the surprise departure of Donnie Smith, who one commentator termed the group's "best-ever CEO".

Ken Zaslow, analyst at BMO Capital Markets, told Mr Smith, who will next month step down as the Tyson Foods chief executive after seven years, said that "your timing of your retirement may neo be perceived as optimal".

Mr Zaslow highlighted Tyson's involvement, with the likes of chicken market rivals Pilgrim's Pride and Sanderson Farms, in a class-action lawsuit over claims that the groups colluded by sharing proprietary data and reducing output.

The action, when it was revealed last month, sent Tyson shares tumbling by as much as 11%.

Mr Zaslow also cited the group's involvement in a debate over using the Georgia Dock wholesale chicken meat pricing index, which has raised concerns over the validity of this market benchmark, besides the announcement of Mr Smith's departure as Tyson unveiled a lower-than-expected rise in earnings.

"Earnings fell short of expectations," he said, also flagging a "perception" that Tyson Foods had "reached peak earnings".

'CEO change is troubling'

Jeremy Scott, analyst at CLSA Americas, also said on Tyson's investor call that "I also echo some of the surprise maybe at the timing" of the departure of Mr Smith, who will be succeeded by Tom Hayes, the group's chief commercial officer.

Separately, in a note, New York-based Pivotal Research Group said it was "not at all happy" with the exit of Mr Smith, who the research company termed "well-loved" and Tyson's "best CEO ever".

Tyson shares had more than quadrupled since Mr Smith was appointed seven years ago, heralding what Pivotal analyst Timothy Ramey termed "the best period of Tyson's history, without doubt.

"The CEO change is troubling," Mr Ramey said, restating a "sell" rating on Tyson shares, with a target price of $40.00.

'Very solid foundation'

However, Mr Smith said that "the board and I agree that now is an excellent time to make this transition" in the chief executive role.

"The company is performing exceptionally well and realising significant growth and shareholder returns through our hybrid strategy of branded prepared foods and fresh meat," he told the Tyson investor call.

He added that the group was "on a very solid foundation", and disputed the class action claims.

"We're looking forward to our opportunity to defending our self in court."

He also praised Mr Hayes, who himself highlighted that Georgia Dock pricing related to only "about 4%, maybe a little less" of Tyson's chicken volumes.

Mr Smith said: "Simply put, I believe the company has a bright future and that Tom is the right leader for this next phase of our development."

Shares fall

Tyson Foods shares closed down 14.5% at $57.60 on Monday, their weakest close in nine months, after the announcement of the smaller-than-expected rise in earnings, and Mr Smith's departure.

Of nine brokers monitored by Reuters, seven have a "buy" or "strong buy" rating on the shares, three a "hold" and one a "strong sell" recommendation.

By Mike Verdin

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