010576 IBP Shares Rise on Favorable Tyson Testimony

Chicago - The shares of No. 1 meat packer IBP Inc. rose as much as five percent on belief the company was fairing better than its one-time suitor and court rival Tyson Foods Inc. in a battle over a failed merger.

IBP shares rose to $18.99 in early Friday trading from a close of $18.01 Thursday on the New York Stock Exchange. The stock later leveled off to close up 34 cents to $18.35 on volume of 1.1 million shares, above the recent average of about 736,000. Tyson shares fell 21 cents to $12.63.

Dakota Dunes, S.D.-based IBP is trying to force poultry giant Tyson to uphold a $3.2 billion merger agreement made in November. Tyson backed out of the deal in late March.

“Tyson is getting hammered,” said Christine McCracken, a food analyst with Midwest Research.

Tyson Chief Executive John Tyson gave testimony indicating that proper financial review of IBP was not completed during Tyson's due diligence period.

The CEO said he never asked for IBP's weekly profit and loss statements or reviewed public financial documents indicating Tyson would have trouble meeting fourth-quarter expectations.

That disclosure appears to weaken Tyson's argument in a Delaware Chancery court that IBP withheld information about a government accounting probe at DFG, IBP's Chicago-based appetizer business that was examined by the Securities and Exchange Commission for allegations of mismanagement.

A court representative said the trial may conclude as soon as Friday evening, heightening industry watchers' expectations of further action by the court.

“There's a lot of interest in this stock,” said Prudential Securities food analyst Jeff Kanter, noting he had received several calls from short-term investors looking for his read on the court outcome.

“My gut is that people are trying to take positions and play this a little.”

IBP options activity grew throughout the week, traders said. They noted active buying of June calls near IBP's current trading price, giving buyers the right to purchase the stock at a lower price, should the IBP shares rise on a favorable court outcome.

“We're not expecting anything imminent. There might be something in the next week,” said Peter Walsh, designated primary market maker with Premier Capital LLC at the Chicago Board Options Exchange. “You're getting the impression from reading the tapes that the court might be looking at least a little more favorably ... leaning toward IBP.”

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