001213 Farmers Critical of Tyson Offer to Buy IBP

Washington - Poultry giant Tyson Foods Inc.'s $2.8 billion proposal to acquire meatpacker IBP Inc. triggered a fresh outcry on Monday among farm-state lawmakers who fear agribusiness consolidation is squeezing out family farmers.

Republican Sen. Charles Grassley and Democratic Sens. Tom Harkin and Paul Wellstone urged U.S. antitrust regulators to closely scrutinize the unexpected bid offered by Tyson Foods.

“I'm concerned that the proposal will increase the amount of concentration in the meatpacking industry to the point where it will hurt the independent farmers trying to get fair prices for their products,” said Grassley, who represents Iowa.

“Tyson's already large presence in the retail market might also affect the prices consumers pay at the meat counter,” he added.

Arkansas-based Tyson said it would pay $26 per share, half in stock and half in cash, for IBP, which is headquartered in South Dakota.

Tyson's announcement trumped two earlier offers for IBP. Last month, Smithfield Foods Inc.(NYSE:SFD - news), the nation's No. 1 pork producer, bid for IBP. An earlier bidder was Wall Street brokerage firm Donaldson, Lufkin & Jenrette, whose key investors include agribusiness giant Archer Daniels Midland Co. (NYSE:ADM - news)

The bids for IBP come at a time when ownership of U.S. livestock slaughter and grain handling industries has steadily dwindled to a few companies.

“In the past few weeks alone we have seen attempts to merge IBP with Smithfield, then with ADM, and now with Tyson,” said Wellstone of Minnesota.

“I understand this may be a cause for celebration on Wall Street, but our country's hard-pressed family farmers and ranchers are not cheering one bit.”

IBP purchases large amounts of livestock from family farmers to slaughter. Some farmers have complained that as ownership of slaughterhouses consolidates, there are fewer buyers for their animals, which could mean lower prices.

The Justice Department and Federal Trade Commission routinely review large mergers of U.S. companies. Regulators can require asset sales or sue companies to block a merger if they believe a deal could harm consumers or other market players.

Mergers among agribusinesses -- such as Cargill's acquisition of the grain unit of Continental Grain Co -- have traditionally been reviewed by the Justice Department. Spokesmen for both the Justice Department and the FTC declined to comment on Tyson's offer to buy IBP.

Harkin, an Iowa Democrat, immediately sent off a letter to the Justice Department demanding that regulators closely examine the Tyson bid, which he described as “potentially devastating for family farmers and ranchers.”

“I have already called on the Justice Department to give very careful scrutiny to the proposed Smithfield acquisition of IBP,” Harkin said.

“I fully expect Justice to examine the Tyson proposal as well and will be following up closely to make sure it happens,” he added.

U.S. Agriculture Department officials would not comment on the Tyson bid.

Earlier this month, Agriculture Secretary Dan Glickman said the Smithfield's proposed bid to buy IBP needed “a very close, serious review.” Glickman sent a memo to the Justice Department outlining the department's concerns.

Tyson executives, speaking on a conference call with analysts and investors, said it hoped its bid would not invite as much antitrust scrutiny as Smithfield's proposal to buy IBP. The combination of Smithfield and IBP would have controlled more than one-third of the $20 billion market for pork products in the United States.

Congress passed legislation this year that will require meatpackers to report twice each day the prices paid to farmers for cattle and pigs. The new reporting requirements are intended to give farmers more information about the market and help them receive competitive prices.

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