Tyson Seeks IBP Acquisition After Lowering Debt Load

Tyson Foods Inc.’s $4.2 billion offer to acquire IBP Inc. follows a 1999 prediction by chairman and CEO John Tyson that his company would be in a position to “go out and get somebody” after cutting its debt below $1.7 billion.r

The Springdale poultry giant has reduced its debt to $1.36 billion, and Monday it announced an offer to acquire all outstanding common stock of IBP.r

The proposed transaction would have a value of $4.2 billion, including the assumption of $1.4 billion of IBP debt. Tyson said it could finance the cash portion of the purchase from readily available sources.r

Tyson stock was down $1.50 at $12.50 in trading late Monday morning.r

Tyson’s offer was actually the third for IBP since October. A group composed of affiliates Donaldson Lufkin and Jenrette and members of IBP’s senior management made an offer Oct. 1. Smithville Foods Inc., which backed out of buying Tyson’s pork division in December 1999, made an offer Nov. 12.r

“We feel our proposed transaction represents superior value for IBP shareholders, as Tyson is an experienced transaction partner with a strong balance sheet,” John Tyson said.r

Tyson is expecting to hear from IBP’s special committee within 24 hours, Tyson spokesman Ed Nicholson said.r

IBP, based in Dakota Dunes, S.D., generated $14.1 billion in sales in 1999. The company, which employs 49,000, has more than 60 production sites in North America, joint ventures in China, Ireland and Russia, and sales offices worldwide. The company has four business segments: the IBP Fresh Meats Co., Foodbrands America Inc., the Consumer Branded Products Group and the IBP International Sales Co.r

For the last two years, Tyson Foods executives have preached divesting the company of non-poultry interests and focusing on “feathers.” But John Tyson said IBP was too good to pass up.r

“This is a rare point-in-time opportunity to acquire a company that will make us the world’s leading marketer of beef and pork, in addition to chicken, and have it be immediately accretive, before synergies, to both our GAAP and cash earnings,” he said.r

Tyson is the world’s largest single producer of chicken products and is also one of the largest producers of live swine. The company sold its seafood division in July 1999.r

IBP and Tyson have crossed paths previously. Tyson purchased Hudson Foods in January 1998 after Hudson’s disaster at one of its plants in Columbus, Neb., where 25 million pounds of hamburger was recalled because of concerns about E. coli contamination. IBP bought the Columbus plant.r

“IBP is a well-managed industry leader that has set a course to drive change in their industry just as we have done in ours,” John Tyson said. “We believe our vast experience in value-added convenience foods and case-ready retail products can accelerate their progress and ensure their success. We are extremely excited about both the domestic and international opportunities the combination of these two great companies affords us.”