010527 Smithfield Says IBP Deal No Longer On Radar Screen

Chicago - No. 1 U.S. pork producer Smithfield Foods Inc. said it has not ruled out an acquisition of beef processor IBP Inc., but IBP's near-term outlook has taken it off Smithfield's “radar screen.”

“I can tell you I wouldn't come close to paying the price for IBP today that was offered just four months ago,” Smithfield Chief Executive Joseph Luter said during an investor presentation.

“This is a whole different environment out there today, be it hoof-and-mouth, be it BSE (mad cow disease), be it depressed earnings in the beef cycle, be it misstatement of earnings or misstatement of projections,” Luter added.

Smithfield was ousted in January from its $32-a-share bid for IBP, the nation's largest beef packer, by poultry giant Tyson Foods Inc. Tyson in March withdrew its own offering for the company, following a series of negative events surrounding IBP that included an SEC probe into its accounting practices and alleged mismanagement at one of its divisions.

Tyson and IBP are now mired in a legal dispute over the merger agreement that is scheduled to move into a Delaware courtroom next week. IBP is trying to force Tyson to uphold its merger agreement.

“If we do something, it will be substantially less than what we were willing to do a few months ago,” Luter said.

He also said that IBP's stock, which had traded above $29 a share in January on takeover speculation, and closed Wednesday at $17.22, could potentially trade as low as $10 to $11 a share.

“Now they're going into a down cycle,” Luter said. “They've got substantial start-up expense in their new plants, their earnings are down substantially over what they were eight or nine months ago.”

Luter, speaking in New York at a conference hosted by Goldman Sachs, also said that his own company would continue to hunt for acquisition candidates.

“We will take advantage of opportunities as they present themselves,” he said. The company agreed last month to buy Moyer Packing Co., the largest East Coast beef processor, and is expected to announce two more acquisitions within weeks.

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