Smithfield Bids $2.7 Billion for Meatpacker IBP
Smithfield Foods Inc. has offered to buy meatpacking giant IBP Inc. for $2.7 billion in stock in a bid to break up IBP’s earlier deal to sell to a management-led buyout group.
IBP is the nation’s largest supplier of fresh beef and pork; Smithfield is a leading pork producer. A deal would add to Smithfield’s product line, enabling it to compete more effectively against diversified meat producers.
Smithfield Chairman Joseph W. Luter said Monday that a merger between his company and IBP shouldn’t result in plant closings because IBP would add beef products, rather than merely overlap pork products. The companies are two of the nation’s largest meatpackers.
U.S. Agriculture Secretary Dan Glickman said his department would give the deal a “very close, serious review” and then advise the Justice Department on whether to approve it.
The Smithfield, Va.-based company has developed a plan to address concerns about concentration in the industry that might include a divestiture of as many as two of its pork-producing plants, Luter said.
Smithfield also does not anticipate job cuts, he said.
In its unsolicited bid disclosed Monday, Smithfield said IBP shareholders would receive $25 of Smithfield stock for each IBP share.
That was nearly 20% higher than Friday’s closing price of IBP common stock and a 12.4% premium over a management group’s cash buyout offer.
Smithfield, which already owns 6.6% of IBP shares, would assume $1.4 billion of IBP debt in the deal.
IBP said a special committee of its board is examining the proposal and it would have no additional comment until the review is completed.
IBP’s board had accepted the lower management buyout offer six weeks ago from a group including members of IBP’s senior management and an investment fund controlled by Wall Street investment firm Donaldson, Lufkin & Jenrette.
Luter criticized the competing offer, saying it would put the financial burden on IBP “and would only benefit selected insiders, not all IBP shareholders.”
Shares of Dakota Dunes, S.D.-based IBP rose $1.38 to close at $22.25 on the New York Stock Exchange. Smithfield closed off $3.63, or 12%, at $28, also on the NYSE.
