Tyson Will Still Have a Cow

Tyson Foods Inc.’s cash election merger with beef mammoth IBP Inc. of Dakota Dunes, S.D., is a smart move for the Springdale poultry producer. Tyson’s beleaguered stockholders should be jazzed about the long-term prospects.

We still expect the deal to be consummated, although bookkeeping errors at IBP subsidiary DFG of Chicago prevented a quick $4.7 billion acquisition. Now SEC and stockholder approval could take until year’s end.

But not even a likely $153 million IBP charge-off will be enough to nix this marriage. Even after a fifth deadline passed, more than 80 percent of IBP’s shares were still tendered indicating widespread stockholder enthusiasm.

CEO John Tyson seems resolute to get the deal done and put his own stamp on a company that’s now in its third generation of family management. Here’s why we think he will be successful:

IBP’s refrigerated distribution network of 400 trucks compliments Tyson’s fleet of 1,000 tractors and 1,500 frozen distribution trailers. This will enable Tyson to introduce more refrigerated products, a move it has longed to make.

The food industry’s retail and food service segments are both in consolidation mode. Buying IBP would enable Tyson to go to high-volume customers and provide chicken, pork and competitively priced beef on a large scale.

Already, Tyson is a supplier to 90 of the top 100 quick-service restaurants. Adding red meat to its repertoire should make it a primary supplier to more eateries. Tyson will also have the ability to fill virtually any order for giants like Safeway Foods and Wal-Mart Stores Inc.

IBP’s sale offers Tyson a “point in time” opportunity to get into red meat. Tyson’s $1.5 billion buyout of Holly Farms Inc. in 1989 included only limited beef interests that were soon sold. IBP had already bought Hudson Foods Inc.’s beef assets in 1998 before Tyson spent $1 billion for Hudson’s other units.

The firm divested itself of the small beef interests because it didn’t have the scale to be a major player in that sector.

Tyson will inherit brand equity in the Thomas E. Wilson beef line that IBP has worked hard to create. Tyson’s unrivaled marketing expertise should take that product even further. The retired triumvirate of Don Tyson, Leland Tollett and Buddy Wray deserve credit for bringing in packaged good experts who helped make Tyson synonymous with chicken.

Now the only challenge is extending that name recognition to another protein.