Smithfield deal reviewed
Senate plans hearings after consolidation fears raised
Kevin Dobbs
Argus Leader Media
October 22, 2006
The U.S. Justice Department has begun an antitrust investigation of Smithfield Foods' plan to buy rival Premium Standard Farms of Missouri, a deal that would combine the nation's two largest hog producers.
Additionally, at the behest of Midwest lawmakers and farmers who worry the deal would hasten the consolidation of livestock markets and allow the merged company to inflate pork prices for consumers, a Senate antitrust committee is planning hearings on the matter. At such hearings, lawmakers often hear testimony from company executives and their critics.
"This merger takes place in an industry already witnessing the decline of independent family farmers and rapid consolidation in meat production and packing. If this merger goes through, farmers will have even fewer choices for selling their hogs, and consumers will certainly be affected by the deal," said Sen. Mike DeWine, R-Ohio.
DeWine chairs the Senate subcommittee that oversees antitrust concerns. He said in a recent statement that he plans to hold hearings on the Smithfield deal in the near future, and lawmakers "will need to scrutinize this deal very carefully."
A Justice Department spokeswoman would not confirm the deadline to complete the investigation. Nor has a date been set for the Senate committee hearings, according to Andrew Langworthy, a spokesman for DeWine.
But both could happen before the end of the year because Virginia-based Smithfield, which owns the John Morrell & Co. meatpacking plant in Sioux Falls, plans to finalize the acquisition in the first quarter of 2007. The company announced in September it would buy its rival for about $650 million in cash and stock.
Dennis Treacy, Smithfield vice president of government affairs, said shortly after the deal was announced that the merged companies will continue to work closely with independent producers and that he expects the Justice Department will approve the deal.
A national coalition of agriculture and consumer groups - including Dakota Rural Action and Dakota Resource Council - earlier this month lined up behind Sens. Tim Johnson and John Thune, both of South Dakota, and lawmakers from Iowa and Nebraska who called for the antitrust investigation.
If Smithfield completes the buy, it will own about 20 percent of the nation's hogs. That could limit independent hog producers' options and ability to get good prices for their meat, Johnson and Thune have said.
They worry that a mammoth Smithfield will have the power to stifle its competition, limit producers' options when it comes to selling their hogs and eventually inflate pork prices for consumers.
That, critics contend, should raise antitrust concerns for federal investigators.
Tom Buis, National Farmers Union president, said the livestock industry already is heavily concentrated, and allowing the acquisition "is only going to make the situation worse."
Smithfield's move for Premium Standard Farms is among a string of acquisitions and expensive projects the company has made this year. Last week, Smithfield announced a joint agreement with ContiGroup Cos. to build a $200 million beef processing facility in Oklahoma.
Smithfield had planned a $100 million update and expansion of its aging Morrell plant in Sioux Falls. Work was supposed to start earlier this year. But then the company launched into other projects, including the $571 million acquisition of ConAgra Foods' refrigerated meats business earlier this year.
The company since has put the Sioux Falls project on hold, and company officials have refused to provide any information on when or if the work ever will get under way.
But Ron Bell, the chief building official in Sioux Falls, said in a recent interview that, with winter around the corner, crews would have broken ground by now if they intended to start on the 232,000-square-foot expansion yet this year.
argusleader.com
Senate plans hearings after consolidation fears raised
Kevin Dobbs
Argus Leader Media
October 22, 2006
The U.S. Justice Department has begun an antitrust investigation of Smithfield Foods' plan to buy rival Premium Standard Farms of Missouri, a deal that would combine the nation's two largest hog producers.
Additionally, at the behest of Midwest lawmakers and farmers who worry the deal would hasten the consolidation of livestock markets and allow the merged company to inflate pork prices for consumers, a Senate antitrust committee is planning hearings on the matter. At such hearings, lawmakers often hear testimony from company executives and their critics.
"This merger takes place in an industry already witnessing the decline of independent family farmers and rapid consolidation in meat production and packing. If this merger goes through, farmers will have even fewer choices for selling their hogs, and consumers will certainly be affected by the deal," said Sen. Mike DeWine, R-Ohio.
DeWine chairs the Senate subcommittee that oversees antitrust concerns. He said in a recent statement that he plans to hold hearings on the Smithfield deal in the near future, and lawmakers "will need to scrutinize this deal very carefully."
A Justice Department spokeswoman would not confirm the deadline to complete the investigation. Nor has a date been set for the Senate committee hearings, according to Andrew Langworthy, a spokesman for DeWine.
But both could happen before the end of the year because Virginia-based Smithfield, which owns the John Morrell & Co. meatpacking plant in Sioux Falls, plans to finalize the acquisition in the first quarter of 2007. The company announced in September it would buy its rival for about $650 million in cash and stock.
Dennis Treacy, Smithfield vice president of government affairs, said shortly after the deal was announced that the merged companies will continue to work closely with independent producers and that he expects the Justice Department will approve the deal.
A national coalition of agriculture and consumer groups - including Dakota Rural Action and Dakota Resource Council - earlier this month lined up behind Sens. Tim Johnson and John Thune, both of South Dakota, and lawmakers from Iowa and Nebraska who called for the antitrust investigation.
If Smithfield completes the buy, it will own about 20 percent of the nation's hogs. That could limit independent hog producers' options and ability to get good prices for their meat, Johnson and Thune have said.
They worry that a mammoth Smithfield will have the power to stifle its competition, limit producers' options when it comes to selling their hogs and eventually inflate pork prices for consumers.
That, critics contend, should raise antitrust concerns for federal investigators.
Tom Buis, National Farmers Union president, said the livestock industry already is heavily concentrated, and allowing the acquisition "is only going to make the situation worse."
Smithfield's move for Premium Standard Farms is among a string of acquisitions and expensive projects the company has made this year. Last week, Smithfield announced a joint agreement with ContiGroup Cos. to build a $200 million beef processing facility in Oklahoma.
Smithfield had planned a $100 million update and expansion of its aging Morrell plant in Sioux Falls. Work was supposed to start earlier this year. But then the company launched into other projects, including the $571 million acquisition of ConAgra Foods' refrigerated meats business earlier this year.
The company since has put the Sioux Falls project on hold, and company officials have refused to provide any information on when or if the work ever will get under way.
But Ron Bell, the chief building official in Sioux Falls, said in a recent interview that, with winter around the corner, crews would have broken ground by now if they intended to start on the 232,000-square-foot expansion yet this year.
argusleader.com