Tyson Ends Deal to Buy IBP

Tyson Foods Inc. of Springdale said today it will discontinue plans to acquire IBP Inc. in a $4.7 billion deal.

Tyson attorney Les Baledge sent a letter to IBP Chairman and CEO Robert Peterson and IBP Special Committee Chairperson JoAnn Smith on Thursday informing the Dakota Dunes, S.D. company of Tyson’s decision.

IBP accepted Tyson’s $32-per-share, all-stock offer over a similar offer from Smithfield Foods Inc. on Jan. 1. But the Securities and Exchange Commission had begun an investigation into IBP’s accounting practices, in particular subsidiary DFG Foods in Chicago. That probe, which Tyson said it didn’t know about until nine days after it agreed to buy IBP, led to five different deadlines set by Tyson for the acquisition.

IBP is the world’s largest producer of fresh beef and pork.

Tyson’s original bid was $30 per IBP share. The $4.7 billion deal included $1.5 billion in assumed debt.

John Tyson, chairman and CEO of the Springdale poultry giant, said, “While we continue to believe that the combination of IBP and Tyson would have created the premiere protein company in the world, we simply cannot endorse a decision to complete the transaction under the facts as we understand them today. My decision today was based on what I felt was in the best interest of our company and its shareholders.”

In his letter to IBP, Baledge said the issues raised by the SEC concerning IBP’s financial statements led to the decision to forego the acquisition.

“As you know, we learned of the undisclosed SEC comments on Jan. 10, 2001,” Baledge wrote. “Ultimately, IBP restated its financials and filings to address the SEC’s issues and correct earlier misstatements. “Unfortunately, we relied on that misleading information in determining to enter into the merger agreement. In addition, the delays and restatements resulting from these matters have created numerous breaches by IBP of representations, warranties, covenants and agreements contained in the Merger Agreement which cannot be cured.

“Consequently, whether intended or not, we believe Tyson Foods, Inc. was inappropriately induced to enter into the Merger Agreement. Further, we believe IBP cannot perform under the Merger Agreement. Under these facts, Tyson has a right to rescind or terminate the Merger Agreement and to receive compensation from IBP. We have commenced legal action in Arkansas seeking such relief. We hope to resolve these matters outside litigation in an expeditious and business-like manner. However, our duties dictate that we preserve Tyson’s rights and protect the interests of our shareholders.” r

Shares of Tyson (NYSE: TSN) closed today at $11.50. Shares of IBP (NYSE: IBP) closed at $22.79. The termination was announced after the market closed.