001138 IBP Considering Smithfield Buy Offer

Dakota Dunes, SD - A special committee of the board of IBP Inc. said it will enter talks with Smithfield Foods Inc., which has make a $2.7 billion stock offer to buy the meatpacker.

Already on the table is a competing cash offer from a subsidiary of Donaldson, Lufkin & Jenrette Inc. and an IBP management group to buy IBP for about $22.25 a share, or $2.4 billion.

In its letter to Smithfield Chairman Joseph W. Luter III, the committee said “... the Special Committee is fully committed to the objective of maximizing value for the IBP shareholders ... (and) has determined that your proposal meets the applicable threshold under IBP's merger agreement with Rawhide Holdings Corp. (the DLJ buyout group) and is therefore prepared to enter into discussions with you regarding your proposal.”

Meanwhile, Sen. Byron Dorgan, (D-ND) asked the Justice Department to block the merger, saying it is part of a “larger and dangerous trend” that is “choking the economic life out of our family farmers.”

In a letter to Attorney General Janet Reno, Dorgan said “the bargaining power of agribusiness firms over family farms increases, and farmers are increasingly in the role of captive producers for these firms.”

IBP, headquartered in Dakota Dunes, is the world's largest producer of fresh beef and pork. Smithfield is a leading pork producer.

IBP spokesman Gary Mickelson said he could not comment on what the time frame of any discussions might be. IBP officials released the letter but said in an accompanying statement that they consider any comments on the competing offer to be inappropriate.

Luter said in a statement that he was pleased with the committee's response and that “We believe the benefits of the transaction we are proposing are compelling for all shareholders, employees, raw material producers, customers and the communities of both companies...”

In its unsolicited bid, Smithfield said IBP shareholders would receive $25 of Smithfield Foods common stock for each IBP share.

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