020332 Tyson Appeals IBP Merger Ruling

New York - Tyson Foods Inc. has asked a Delaware court to throw out a landmark ruling on its merger with IBP Inc. as the country's largest producer of beef, chicken and pork seeks ammunition in a legal tussle with shareholders who say they lost money in the deal.

In an appeal filed on Tuesday, Tyson, which was forced to take over IBP, asked the Delaware Supreme Court to overturn the legal conclusions last June by the state's Chancery Court. Tyson also argued that the case should have been tried in Arkansas, not Delaware.

The decision issued by Judge Leo Strine, which altered the terrain of merger deals, said that Tyson could not invoke the "material adverse change" -- or MAC -- clause of its agreement and walk away from a proposed takeover of IBP.

Rather than fight the decision at the time, Tyson settled the case and bought IBP. The appeal would not change the Tyson-IBP combination.

However, Springdale, Arkansas-based Tyson is faced with lawsuits by some former IBP shareholders, who say Tyson misled investors when it said it was abandoning the deal with IBP. The shareholders can invoke as fact the findings of another court, which is why Tyson is trying to overturn the decision.

If Tyson were to win its appeal, it would strip the investors of any basis for their case, a Tyson source said.

"If the Supreme Court says Tyson had the right to walk away because of the MAC, then the federal lawsuit will be dismissible right away," the source said.

Appeals are generally only allowed within 30 days of a ruling. In this case, Tyson is claiming that because one related decision was filed Feb. 11, it could challenge all the Chancery Court's rulings.

John Reed, an attorney with Duane Morris LLP who represents IBP shareholders, said he thought Tyson only could challenge the Feb. 11 decision, which denied Tyson's request to vacate the ruling.

Even if Tyson were to win its appeal, Reed said he would be able to introduce the facts of the merger case in the shareholder suit, although it would take longer to do.

"It seems to me to be a waste of judicial resources but we'll do it if necessary," Reed said. "It doesn't really affect the viability of our case."

Eight shareholder cases against Tyson have been consolidated and Reed is the lead attorney for four institutional investors who are seeking class action status to represent other shareholders.

Tyson, which had reached a deal with IBP on Jan. 1, 2001, later argued it should be allowed to abandon the buyout because of restated financial information by IBP in March 2001.

Tyson said the changes fell under the purview of the MAC clause, which are inserted into agreements so that one side can pull out of a merger agreement if anything substantial changes between the time a deal is struck and when it is completed.

The court said Tyson was trying to get out of the deal because of "buyer's regret" and not because of any accounting or financial concerns.

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