000876 Farm Group Asks for Probe of Smithfield-IBP Deal

Washington - A major U.S. farm group has asked the Justice Department to investigate whether Smithfield Foods Inc., the nation's largest pork processor, violated anti-trust laws by acquiring a 6.3% interest in its chief rival, IBP Inc.

“Our farmers and ranchers do not believe it is possible for one company to own such a substantial share of its chief competitor and maintain an open and competitive marketplace,” National Farmers Union President Leland Swenson said in a letter to the Justice Department's anti-trust division.

In a filing this week with federal regulators, Smithfield disclosed it had acquired 6.6 million IBP shares, valued at about $112 million based on the current stock price.

The acquisition makes the Smithfield, Va.-based firm the third-largest stakeholder in IBP, which is the nation's largest processor of fresh meat and the second largest processor of fresh pork behind Smithfield.

In a separate statement, Swenson took aim at Smithfield's record profits in the quarter ended July 30. The company's net income was $44.6 million, or 81 cents a diluted share, compared with $6.9 million, or 15 cents a share, a year ago, Smithfield reported Tuesday.

“We have nothing against profit and do not intend to begrudge Smithfield of theirs,” Swenson said. “Still, we take serious issue with the tactics used to ensure this profit while making it more and more difficult for pork producers to achieve a fair price in the market place.”

The National Farmers Union asked Justice to investigate whether Smithfield had violated any anti-trust laws and whether it should be required to divest some of its assets and take other actions to restore competition.

Jerry Hostetter, a spokesman for Smithfield, said the company's purchase of IBP shares would have no effect on competition in the pork processing industry.

“IBP and Smithfield Foods are competing as intensely today as they ever have,” Hostetter said.

Over the years, Smithfield has bought and sold stocks in several other companies, including IBP.

“This is another another passive investment, although a little larger than the others,” Hostetter said.

The company's soaring profits reflect a 41% increase in hog prices and the company's purchase of Murphy Farms, a large hog producer, during the past year, he said.

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