010712 Tyson & IBP Agree to Terms on Merger

Little Rock, AR - When meat market owner Fred Tisdale heard that the nation's largest chicken and beef producers would merge, he lamented the passing of an era.

The $2.7 billion deal between Tyson Foods Inc. and IBP Inc. will mean more prepackaged beef and less demands for skilled butchers.

“We already have case-ready chicken. Now we'll see more beef that way instead of butchers in the supermarket,” said analyst John M. McMillin of Prudential Securities.

The deal, currently valued at about $26 a share in cash and stock, will create a meat processing company with 28% of the beef market, 25% of the chicken market and 18% of the pork market. The pact already has Justice Department approval.

“It will cut into my business a little bit,” said Tisdale, who owns Aletter's Old Fashioned Meats and has worked in the beef industry for 30 years. He said demand for fresh cut meat has been on the decline for years.

“I already knew this was coming,” he said. “Few people know how to break down beef from the carcass anymore.”

The companies concluded their deal after a Delaware judge ordered Springdale-based Tyson to stick with its plan to buy IBP, of Dakota Dunes, S.D.

Tyson announced Jan. 1 that it would buy IBP, topping a rival bid from Smithfield Foods, the world's largest pork producer. Tyson tried to call off the deal in March, saying IBP provided misleading information about the company's worth.

On June 15, Delaware Vice Chancellor Leo E. Strine Jr. said he was not persuaded by Tyson's claims that it was kept in the dark about financial problems at an IBP subsidiary. He said Tyson improperly terminated its agreement with IBP and must complete the deal.

Rather than fight the judge, Tyson said it would comply.

Under Wednesday's agreement, IBP shareholders will be able to sell 50.1% of their stock for $30 and the rest can be converted into Tyson Class A common stock at a ratio that stood Wednesday afternoon at $21.07.

Separately, the deal also includes Tyson's assumption of IBP's debt, which Tyson said Wednesday stood at $1.7 billion -- up from $1.5 billion when the deal was announced in January.

“Today's step moves us down the road to our vision, creating the world's leading protein provider,” Tyson chairman John Tyson said. “It allows us to better serve our customers in today's consolidating marketplace and will produce value for shareholders.”

Dick Bond, IBP's president, said he looked forward to the merger.

Tyson said the offer would be complete no later than Sept. 1.

Tyson has 68,000 employee and 7,000 contract growers in 18 states and 16 countries and exports to 79 countries. IBP has 60 production sites in North America and is involved in joint operations in China, Ireland and Russia.

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