Otto Bresky bought a couple of Kansas flour mills on the cheap in 1918. Over the next forty years, his company acquired numerous Kansas mills. He took the company public in 1959 via a merger with Hathaway Industries, changing the name to Seaboard Allied Milling corporation and trading under the symbol SEB. The Company then began concentrating on milling operations closer to major metropolitan areas along the east coast and southeast US. Today, headquartered in Merriam, KS, SEB operates hog production, marine manufacturing, power generation, cargo and commodities brokerage, turkey (under the Butterball brand), sugar, and alcohol.
A humongous mess of a conglomerate, that probably serves the interests of the Bresky clan quite nicely. The Company is owned 77% by the Bresky family through various trusts and subsidiaries. They have been kind enough to leave 23% of the outstanding shares to the public.
Price tag: $3,800 a share, market cap of $4.6 billion.
The huge price (a function of the narrow float) and the disparate business models makes the irregularity attractive to the enterprising investor. Breaking down the individual businesses for the 2022 metrics reveals the following valuations (the multiples are very much back-of-the envelope based on 1-2 comparables each):
Taking into effect even these very primitively derived multiples, we can see that the business’s sum-of-parts valuation is half a turn greater than the March 2023 market cap EV/EBITDA of $4.4 billion. 2022 revenue and EBITDA were $11 billion and $800mm (8% margin). The Company has a negative liquidation value, with liquidation value of assets of $1.2 billion compared to total liabilities net of cash of $1.8 billion. The company is liquid, with cash to debt of 0.35x and a current ratio of 2.7x. As we can see, its market value and sum-of-parts valuations based on primitive looks at the business overall are reasonably cheap at under 8.0x EV/EBITDA (very nice for a multi-billion $revenue company). Tacking on the shipping and power segments are nice added bonuses to the core food business. The marine segment in particular has nearly 30% margins.
The market might overlook Seaboard because of its complexity, even though it has a significant market cap ($4.4 billion) and carries a debt burden of over $1 billion across multiple facilities[1]. Internationally, the company likely has assets with significant difficulty to value: a quarter of employees are in the Caribbean and South America, and another sixth are in Africa. Food prices have increased, but that seems to have been offset by the pork segment’s weakness in 2022 (lower margins). Limited shareholders of record and the sheer price tag: that value wouldn’t be unlocked until the Bresky clan sold off assets, which doesn’t look like it will happen anytime soon. The dividend only yields 0.24% ($9/share). The list goes on.
Full history of the company’s share performance (since 1992)
Last Five Years’ performance:
Share performance has really been flat since 2018, and COVID didn’t help the international component of course. But Seaboard provides a decent amount of our food, with Butterball alone processing over 1 billion pounds of turkey, the pork segment with capacity to process 6 million hogs annually (bringing total meat capacity to 1.8 billion pounds, assuming yield of 140 pounds of meat per hog and operating at around 90-95% capacity), and the commodities segment (grain and other veggie-adjacents) moving 14 million pounds to boot. Though this may sound like an astounding amount of food, in 2015-2018 the average American consumed 2100 pounds of “protein foods” per year. This amount makes for total US protein consumption of nearly 700 billion pounds of meat consumed annually by the American population. Seaboard accounts for about 0.3% of that market.
[1] Telling us in turn that it has good access to the capital markets, and therefore likely won’t experience a liquidity crunch in the event of an emergency.
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