001265 IBP Asks Holders to Wait on Tyson Bid

Chicago - IBP Inc., the largest U.S. beef processor, told shareholders to wait before tendering their stock to No. 1 poultry concern Tyson Foods Inc., which had begun a tender offer for IBP earlier this month.

Tyson had offered to buy up to 50.1% of outstanding IBP shares at $26 a share, its latest step to execute a plan to acquire IBP for about $2.8 billion. This move followed an earlier unsolicited bid of $25 a share, or about $2.7 billion, from pork producer Smithfield Foods Inc.

In a regulatory filing Friday, IBP said its “special committee is recommending that IBP shareholders take no action with respect to the Tyson offer at the current time.”

Buying Dakota Dunes, S.D.-based IBP, whose sales last year totaled $14 billion, is considered by both Tyson and Smithfield as a way to broaden their meat offerings and improve scale for larger retail grocery customers, which have been rapidly consolidating. IBP sells a range of boxed beef, pork and processed meat products.

Analysts said the company's cautionary approach to the bids signals its desire to garner a higher valuation.

“I didn't think it was unexpected. I think they want to have an auction,” said Salomon Smith Barney analyst Jaine Mehring. “I think it's just going to come down to price and terms.”

IBP's committee, which consists of independent company directors, disclosed that its due diligence continues for both the Smithfield and Tyson offers. The committee also said that it was hopeful its review process would result in “improvements in the terms” of the bids.

IBP already had a friendly $2.4 billion agreement with DLJ Merchant Banking Partners to take it private. Industry watchers have said it's unlikely that DLJ will continue bidding.

A representative for Smithfield, based in Smithfield, Va., was not prepared to comment. A spokesman for Springdale, Ark.-based Tyson declined to comment.

A combination between the nation's largest beef processor and another meat processing giant -- whether Tyson or Smithfield -- has raised concerns among politicians and others fearful that antitrust laws may be violated. Both bidders have filed for antitrust approval with the Securities and Exchange Commission.

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