IBP Quietly Goes About Big-Time Business

From Springdale to Siouxland, thousands of people have followed the soap opera that has been Tyson Foods Inc.’s affair with IBP Inc. The one-time courtship turned ugly for several months before a Delaware judge forced the two meat powers to kiss and make up in a shotgun courtroom marriage.

Such has been the stormy engagement among the chickens, cows and pigs. But now, only about a month away from finalizing the deal, all seems to be rather calm in the corporate barnyard.

With people from both inside and outside Tyson soon to be affected by the acquisition, some are asking, “Just who is this IBP?”

For a company whose annual revenues — $16.9 billion in 2000 — more than doubled that of Tyson, IBP is hardly a household name outside of the meat industry. And even its first major foray into brand-name marketing uses the Thomas E. Wilson name for its packaged beef and pork cuts.

Who indeed is this company that is based in South Dakota but whose name originally stood for Iowa Beef Packers? And why, as one industry official described it, is IBP the “quiet giant” of the meat industry?

Even IBP’s headquarters is a bit of an oddity. IBP resides in Dakota Dunes, S.D., which is actually no town at all. Rather, it is a decade-old, 20,000-acre, master-planned community that shares the same ZIP code but not the same governing board as North Sioux City, S.D.

Dennis Melsted, whose company developed Dakota Dunes, said IBP is “a company that goes about its business of selling meat. From a corporate point of view, yes, it’s very low key.”

North Sioux City, just across the Missouri River from Sioux City, Iowa, has a small population of a little more than 2,000 people, but the town claims two major companies in IBP and Gateway Computers.

IBP was founded in 1960 in western Iowa, later moved its headquarters to Dakota City, Neb., and finally settled in 1995 on Dakota Dunes. It’s now within five miles of both the Iowa and Nebraska borders. Many Northwest Arkansas residents may be surprised to learn that IBP’s offices are only five hours north of Kansas City, according to company spokesman Gary Mickelson.

It’s no secret why IBP chose to relocate to South Dakota in the 1990s. South Dakota has no corporate income tax. no personal income tax, no personal property tax and no business inventory tax.

The Siouxland area has a total population of about 133,300.

Who Knows Whom?

The IBP community has been tested for much of this year with the bid process, the legal battles and now the pending completion of its sale to Tyson. It appears the IBP community knows more about Tyson than the Tyson community knows about IBP. Tyson wasn’t completely sure what it was getting when it first attempted to purchase IBP. A lengthy investigation by the Securities & Exchange Commission revealed some serious bookkeeping wrongdoings with IBP subsidiary DFG Foods of Chicago.

The trial in Delaware brought about some harsh comments from then IBP Chairman and CEO Bob Peterson, who retired after 21 years with the company. He has joined Tyson’s board of directors along with IBP President Dick Bond. Peterson is a strong personality who has spent 45 years in the livestock and meat processing industry. During his leadership, IBP almost quadrupled its annual revenue, and the company went from 9,500 employees to 52,000.

“I have always respected and admired Bob for his business instincts and the straightforward, progressive way he runs his company,” said Don Tyson, senior chairman of Tyson Foods.

Other industry officials also heaped praise on the industry icon.

“Bob Peterson is a towering, tireless titan of energy and presence,” said Rosemary Mucklow, executive director of the National Meat Association. “In his leadership of IBP, he has left no stone unturned in his quest for the highest standards for innovative productivity and meat safety. His sheer velocity as the driving force of the nation’s, and even the world’s, largest beef processor will be missed. Men of the mettle of ‘Big’ Bob Peterson come only rarely in a lifetime. He leaves a legacy imprinted on the beef processing industry of remarkable change and tenacity.”

Debi Durham, president of the Siouxland Chamber of Commerce in Sioux City, said any signs of Peterson being overbearing have escaped her sight.

“The advantage of my position is I get to work with people on a completely different realm,” Durham said. “Mr. Bond and Mr. Peterson are pillars of integrity and strength. They are in an industry that works on very tight margins. Competition happens to be the order of the day. When you have a culture like that, you have to have people of strength to lead an organization.

“Mr. Peterson is a man of great passion. Sometimes, people of great passion come off as very, very focused. All they know is success. They don’t have another option. When he wakes up in morning, he’s thinking about success. But he cares about the people who work for him very dearly.”

Who Will Be Affected?

With about 121,000 combined employees under the new Tyson Foods, workers from laborers to front office personnel are bound to be affected by the merger. Chairman, President and CEO John Tyson recently announced numerous changes, but as the companies begin to fall into a more permanent comfort zone, there could be other alterations.

“The reality is that anytime you have a change like this, there is a certain amount of anxiety,” said Durham. “However, my point of view from working all these years with the management of IBP is that for them to have continued growth, this is a very positive move.”

Durham has some knowledge of the Tyson community. She is a native of Joplin, Mo., and her brother, Brian Vowels, received his masters degree from the University of Arkansas and later worked at a Fayetteville bank.

“I know my brother always had a high regard for Tyson,” Durham said. “Most people up here are very familiar with Tyson. It’s a household word. Tyson has a very good reputation. IBP has a very solid reputation, too. Their philosophies should merge very, very well.”

Sioux City Journal Publisher Ron Peterson — no relation to Bob Peterson — said IBP is a “very important part” of the Sioux City community. “I think some people are a little nervous, certainly,” he added.

Both companies’ communities have great interests in the merger. Families will be uprooted, and plants will be affected, but “To what degree?” is the unanswered question that may remain so for months, even years, after the final signature officially closes the deal.

“You have a chance in all mergers that there will be some effect on the employees,” Melsted said. “But, we’re not concerned about anything happening to [IBP’s] huge and nice facility at the Dunes. No company in Arkansas or wherever would ever come in and destroy that building.”

Springdale Chamber President Perry Webb said his office has had talks with Tyson officials. But Webb said there’s no way to know “just what is going to shake out” at this point.

“Will it mean more residents with people being transferred in here?” asked Webb. “At this point, it’s just too preliminary. I would assume that most communities at this point are not sure what the impact is going to be. There are certainly possibilities there. As the transition moves along, there could be some corporate changes that would allow for some transfers in here. When that happens, we’ll take care of it any way we can.”

IBP has more than 60 production sites in North America; joint venture operations in China, Ireland and Russia; and sales offices throughout the world (see IBP locations).

Tyson has plants in 17 states and Mexico.