Tyson Merges with IBP: Chicken giant Tyson Foods has outbid rival Smithfield Foods for the rights to merge with IBP Inc., the nation's largest meat packer.
The purchase agreement ended a year-ending bidding war between the two suitors. Tyson came out on top with an offer of $30/share of IBP common stock. The deal is valued at about $4.7 billion, 50.1% in cash and the rest in Tyson Class A common stock. Smithfield had upped its ante to $32/share. But the Smithfield, VA, top pork producer and packer faced a long road of antitrust scrutiny, and its bid represented stock only.
A special committee of IBP's board agreed to accept the Tyson's offer, which includes assuming about $1.5 billion in IBP debt.
"We are extremely pleased that IBP has accepted our proposal," says John Tyson, chairman, president and chief executive officer, "which we believe creates tremendous value for the shareholders, team members and customers of both companies. By combining the number one poultry company with the leader in beef and pork, we are creating a unique company that has a major global presence."
The transaction, which is currently under antitrust review by law, is expected to close in the first quarter of this year. Farm state lawmakers and some farm groups have expressed concerns that this merger could increase the level of concentration in the meatpacking industry and result in lower prices paid to independent farmers. Groups charge that Tyson's retail presence could force consumers to pay more for meat products.
For his part, Ron Plain, University of Missouri agricultural economist, disagrees that the pending merger will have negative consequences. He says this could be a good mix for the beef and pork industries for two reasons.
First, Tyson has been very successful in new product development with chicken. Putting this same effort forward could be very good news for beef and pork segments.
Second, Tyson has the ability to service large retailers and could provide front-line expertise in managing the grocery meat case.
This realignment could help reduce the ever-widening, farm-to-retail price spread and return a bigger share of the consumer dollar to the producer, Plain suggests.
This prospective merger also is positive in that it doesn't really reduce the number of meat buyers since Tyson and IBP don't overlap in the species they slaughter and process.
Colorado Hog Farm Closes: National Hog Farms, the largest hog farm in Colorado, has closed its doors. National owned 34,000 sows in operations in Colorado and Nebraska.
The farm at Kersey, CO, was closed in a mutual agreement between National Farms and the state of Colorado, says company president Bill Haw. It probably will be reopened.
National Hog Farms is the only hog farm in Colorado that does not have lagoons to store hog manure. Used were two, 1.2-mill.-gal. steel tanks.
Farmland Sets New Course: Farmland Industries is changing its direction following a year in which the Kansas City-based farmer cooperative absorbed a net-after-tax loss of $29.25 million.
A major focus will be in expansion of food brands. Farmland's strategy in the meats area "is to build our brand and not through company investment in more sows," reports Jerry Leeper, vice president, Livestock Group.
"We are looking for innovative ways to convert to and expand our coordinated production system, with the emphasis being on producer participation," he says. In correcting widely publicized remarks, Leeper explains the goal is not to sell off Farmland's sows, but rather to seek ways to transfer sow ownership to contract producer-owners. Farmland has reduced sow numbers from 81,000 last year to just more than 50,000 sows today. The process of transferring sows in the contract production system could take four to seven years, he projects.
"Our long-term strategy is to expand our coordinated production system by including more producers and leveraging management, not by capital investment by Farmland," he stresses.
One of the major changes to improve profits is expansion of branded food product sales nationwide. This past year saw the introduction of a complete line of case-ready pork products and Farmland pre-cooked bacon. An all-natural, branded pork product is in the works, he says.
Mandatory Price Reporting: USDA's Agricultural Marketing Service will offer education and outreach sessions to producers and others affected by mandatory price reporting.
Under the new law, all pork packers that process more than 100,000 head/year are required to report prices and contracts to USDA. The agency will then publish the information to the public.
Sessions will be 1-5 p.m. Jan. 16 at the Hampton Inn Airport, Indianapolis, IN; 1-5 p.m. Jan. 23 at the Scheman Building, Iowa State University, Ames, IA; 2-3:30 p.m. Jan. 24 at Iowa Pork Congress, Veterans Auditorium, Des Moines, IA; and 1-5 p.m. Jan. 25 at the Best Western Ramkota Hotel, Sioux Falls, SD.
For more details, visit www.ams.usda.gov/news/338-00.htm.