Tyson, IBP to Go Ahead With Merger
Tyson Foods Inc. said Monday that it would heed a judge’s order and resume plans to acquire IBP Inc. in a $3.2-billion deal that would combine the nation’s largest chicken and beef producers.
Tyson opted against fighting a Delaware judge who ruled Friday that the Springdale, Ark.-based poultry company improperly tried to back out of the deal, under which Tyson also would assume $1.5 billion in IBP debt.
Officials from both companies met Sunday in what Tyson called a “positive and productive” meeting to try to move forward on the deal that, if successful, would create a meat-processing powerhouse with 30% of the beef market, 33% of the chicken market and 18% of the pork market.
With the announcement, Tyson stock tumbled $2.01, or nearly 18%, to close at $9.37 on the New York Stock Exchange, where IBP shares jumped 33%, or $6.08, to close at $24.35.
Tyson announced a deal Jan. 2 to buy IBP, of Dakota Dunes, S.D., topping a rival bid from Smithfield Foods, the world’s largest pork producer. The Justice Department approved the deal later that month.
But Tyson called off the deal in late March, alleging that IBP had provided misleading information about the company’s worth. IBP then sued to enforce the deal’s terms and on Friday, a Delaware Chancery Court judge ruled in its favor.
Vice Chancellor Leo E. Strine Jr. said he was not persuaded by Tyson’s claims that it was kept in the dark about financial problems at an IBP subsidiary. He said Tyson improperly terminated its agreement with IBP and must proceed.
Tyson said Monday that the companies agreed to work toward completing a merger on the same financial terms to which they’d earlier agreed.
John M. McMillin of Prudential Securities Inc. said the combined company could mean “a potentially stronger company” and serve the retailer and consumers better.
George Dahlman of U.S. Bancorp Piper Jaffray disagreed, saying the deal would weaken Tyson Foods because the company will take on considerably more debt and reduced earning power.
