Tyson and IBP Agree on $4.42 Billion Merger

Tyson Foods Inc. of Springdale and IBP Inc. of Dakota Dunes, S.D. finally reached a merger plan that was approved by the Delaware Chancery Court Wednesday afternoon.

The deal calls for a $2.72 billion Tyson buyout of IBP, plus $1.7 billion in assumed debt. The original deal called for a $3.2 billion buyout, about 15 percent more than what the two sides agreed on Wednesday. But the assumed debt figure actually rose from an original $1.5 billion.

Tyson was forced to complete its acquisition June 15 in the Delaware court where vice chancellor Leo E. Strine said Tyson had “buyer’s regret” following its original agreement. The two companies had originally reached an agreement Jan. 2, but Tyson called off the deal March 29 following a long probe by the Securities and Exchange Commission into IBP subsidiary DFG Foods’ accounting practices.

IBP immediately filed suit to enforce the agreement. In a 146-page decision, Strine said a decline in IBP’s earnings didn’t amount to a “material adverse change,” known as a MAC — a clause that could have allowed Tyson to cancel the deal. He said Tyson was well aware of accounting problems at IBP’s DFG unit.

Strine gave the two sides until today to reach an agreement, or he would enforce his own terms of the deal.

The delay will save Tyson dramatically in long-term interest. The Federal Reserve has lowered interest rates 2.75 percent since January. The prime interest rate was 9.5 percent Jan. 2. As of Wednesday, they were at 6.75 percent.

Tyson will pay $30 in cash for 50.1 percent of IBP’s common shares, and the remaining IBP shares will be converted into Tyson Class A common stock.

John Tyson, chairman, president and CEO of Tyson Foods, said, “Today’s step moves us down the road to our vision, creating the world’s leading protein provider. Combining these two companies is strategically compelling. It allows us to better serve our customers in today’s consolidating marketplace and will produce value for shareholders.”

With the merger, Tyson Foods will control 25 percent of the chicken market, 28 percent of the beef market and 18 percent of the pork market.

Dick Bond, IBP president and chief operating officer, said, “We are happy about the future and will focus our energy on creating value through combining and growing these two great companies. We at IBP look forward to working with John and the Tyson management team to achieve our vision.”

Tyson’s stock shares (NYSE: TSN) were as high as $12.25 on Jan. 2 but were only at $8.85 Wednesday. IBP was at $27.44 Jan. 2 but was at $24.15 Wednesday.

Tyson Foods is the world’s largest fully integrated producer, processor and marketer of chicken and chicken-based convenience foods, with 68,000 employees and 7,000 contract growers in 100 communities. Tyson has operations in 18 states and 16 countries and exports to 79 countries worldwide. Its annual sales were $7.2 billion in 2000.

IBP is the world’s largest supplier of premium fresh beef and pork products, with more than 60 production sites in North America; joint venture operations in China, Ireland and Russia and sales offices throughout the world. The company, which generated annual sales exceeding $16.9 billion in 2000, employs 52,000 people.