Portion of merger blocked, but some say more needed
Casper – Wyoming’s Attorney General has joined the U.S. Department of Justice and 12 other state attorneys general in filing a suit to block the merger of National Beef Company and JBS S.A.
In March 2008, JBS S.A. announced plans to buy National Beef Co. and Smithfield Beef Group. This would merge three of the five packing companies controlling the U.S. beef market. Remaining national competition would be between JBS, Tyson Foods and Cargill Inc. Under the proposed merger, JBS would become the largest meat packer and the largest cattle feeder in the world. Their assets would include beef and lamb plants in Greeley, Colo. and other packinghouses that routinely buy cattle and sheep from Wyoming.
“Competition must remain in the meat packing business in order for Wyoming ranchers to receive a fair price for their animals,” said U.S. Senator Mike Enzi of the news. “I am pleased the DOJ scrutinized this merger closely because a competitive market is vital to the success of Wyoming ranchers.”
“The Department of Justice heeded our warning. Competitiveness in this sector is vitally important to beef and lamb producers across the country, especially here in Wyoming. It’s simply bad economics for one or two corporations to control any market, especially the livestock market. A bad merger would negatively impact everyone from the ranch to the grocery store aisle,” Senator Barrasso said.
Wheatland cattle feeder and Organization for Competitive Markets Chairman Randy Stevenson agreed, but said DOJ’s actions don’t go far enough. He said OCM along with R-CALF USA will ask the attorneys general to expand their litigation to include JBS S.A.’s acquisition of Smithfield’s Five Rivers Feedlot, the nation’s largest feedlot. Noting further vertical integration he believes will occur from JBS’s acquisition of Five Rivers, he said, “We still have our work cut out for us.”
“We’re happy the Smithfield deal went through,” said Chandler Keys of JBS S.A. during an Oct. 22 interview with the Roundup. He said the Smithfield purchase would be closed within the week.
“We’re disappointed the DOJ is going to try and block us on the National purchase,” said Keys. “We’re committed to pushing this acquisition through. We have other avenues and will begin pursuing those.”
“We are disappointed that the DOJ does not recognize that this transaction is pro competitive and we plan to vigorously contest the DOJ’s attempt to block it,” said Steve Hunt, Chief Executive Officer of USPB.
John R. Miller, CEO of National Beef, added that, “this transaction will bring tremendous value to our customers and other stakeholders through cost savings and other efficiencies as well as increase the depth and reach of our industry-leading programs that deliver better value to both cattle producers and beef consumers. We will not allow our disappointment with the DOJ’s action to distract us from our continued focus on serving the needs of our customers.”
“As JBS has increased its ownership in the packing and cattle feeding industries, NCBA has supported DOJ’s efforts to monitor, evaluate, and—if necessary—act upon these acquisitions. We encourage the process of due diligence and will be closely monitoring this case and the impacts on the beef industry,” said National Cattlemen’s Beef Association President Andy Groseta in response to DOJ’s case. “In particular, we will be making certain that the prices cattle producers receive for their animals do not decrease unfairly. NCBA supports free and fair competition in open markets, and believes this is the best way for cattle producers to remain profitable while providing consumers with high-quality beef.”
“We believe the DOJ and state attorneys general have an extremely strong case and we are extremely pleased that they have taken action to protect the competitiveness of the U.S. cattle industry,” said R-CALF USA President/Region VI Director Max Thornsberry.
“Apparently, the Justice Department’s merger investigation found that the most severe antitrust and anticompetitive problems stemmed from the proposed purchase of the 4th largest meatpacker and not the 5th largest meatpacker, but it’s too early to determine what overall affect this will have on the plans of JBS,” Thornsberry said.
On March 4, 2008 USPB and National Beef announced an agreement under which JBS S.A. would acquire all of the outstanding membership interests of National Beef for US$560 million plus the assumption of all of National Beef’s debt and other liabilities at closing. As previously announced, USBP producer members overwhelmingly voted to approve the transaction on March 14, 2008.
Consummation of the transaction remains subject to resolving this matter with the DOJ. Premium Beef, LLC is the majority owner of National Beef Packing Company, LLC.
Jennifer Womack is managing editor of the Wyoming Livestock Roundup and can be reached at roundup@wylr.net.
