010117 Tyson CEO Suddenly Loves Beef and PorkJanuary 7, 2001New York - For some 65 years, John Tyson's family squawked about how Americans should cut beef from their diets and eat more chicken. But these days, pork and steak are on the menu at Tyson Foods Inc. “I like a good steak. I like a good pork loin. Being from the south, you already have a tendency to be there,” Chief Executive Officer John Tyson said with a chuckle. The poultry giant is poised to considerably increase its beef and pork intake after agreeing to buy leading beef processor IBP Inc. for about $3 billion in cash and stock. Tyson clinched the deal after a bidding war with pork company Smithfield Foods Inc. that developed after IBP set a cheaper deal to take the company private. The deal is a big move for Tyson, who is the grandson of the company's founder and now serves as its chairman, chief executive and president. Springdale, Ark.-based Tyson previously had dabbled in the beef and pork business, but essentially abandoned those efforts when it became apparent the company did not have the market muscle to compete against forces like IBP. Tyson then considered buying IBP in the early 1990s, but opted not to pursue a transaction because it had just completed a $1.5 billion purchase of rival Holly Farms. But when Smithfield unleashed a surprise offer for IBP in November, Tyson decided it was time to make a move. “It took my father 30 years to get to 25% market share in the poultry industry. For us to go and do this any other way would have taken 10, 15, or 20 years,” said Tyson, who described the deal as a “once-in-a-lifetime opportunity”. Branding Key To Ibp Purchase Now, Tyson says, the time is right for the company to take its hugely successful poultry branding strategy and transfer it to IBP's products. “We're here to sell more beef and pork,” he said. Although U.S. poultry is often sold pre-packaged under a variety of well- known brands, most beef is still processed and packaged in supermarket butcher shops and sold with a house label often stamped with a government grade. But Tyson is convinced that American consumers want to buy their beef and pork products just as they do chicken. Indeed, IBP has begun selling packaged beef under the “Thomas E. Wilson” brand and has plans to build additional so- called “case-ready” packaging plants. Tyson also has expanded its offerings in recent years to make ready-made poultry products, such as marinated chicken pieces and frozen products. “They (IBP) looked like we were 20 years ago. They've got it in place and it's just a question of how we accelerate it. I get pretty excited when I think about it,” Tyson said. Tyson Says Deal Won'T Hurt Farmers, Customers But the proposed transaction already has encountered opposition from politicians and farmers, who fear the consolidation will result in lower prices for livestock and higher prices for consumers. The Department of Justice last week issued a “second request” on the proposed deal, meaning regulators are concerned about potential anti-competitive implications. Tyson has expressed confidence about resolving any antitrust issues, and has offered to pay IBP some $70 million if the deal is blocked apart for antitrust reasons. Tyson said company executives are headed to Washington in the next couple of weeks to discuss the transaction with leading lawmakers. He also said he'd be willing to meet with Republican Sen. Charles Grassley, one of the deal's most vocal critics. “We're not here to put anybody out of business,” Tyson said, noting that any increase in consumer sales will also help the nation's farmers. E-mail: sflanagan@sprintmail.com |