DOJ allows Smithfield sale

21 October 2008

News that the Department of Justice will allow Smithfield Beef Group's sale to JBS-Swift & Co sent Smithfield's stock soaring on Monday, October 20, as the promise of a $565 million cash infusion perked up investors worried about the company's debt load. According to, Smithfield are also expected to receive an additional $200 million in proceeds from the deal in the next six months, putting them in prime position to cover $300 million in debt.

The DOJ said it would not oppose the company's sale of Smithfield Beef Group and the Five Rivers cattle feeding operations to JBS-Swift, whereas the government is suing to block the Brazilian beef packer's bid to also buy National Beef Packing Co. There is concern in some quarters that by purchasing National Beef, the nation's fourth-largest beef packer, JBS-Swift, the nation's third-largest beef packer, would lessen competition for fed cattle in the High Plains and Southwest regions. JBS operate beef packing plants in Cactus, Texas; Grand Island, Neb; Greeley, Col; and Hyrum, Utah. By way of acquiring Smithfield Beef Group, the nation's fifth-largest beef packer, JBS also would operate plants in Tolleson, Ariz; Green Bay, Wis; Plainwell, Mich; and Souderton, Pa. National operates three beef packing plants in Liberal, Kan; Dodge City, Kan; and Brawley, Calif. National's Brawley, Calif, plant and Smithfield's Tolleson, Ariz, plant essentially are the only two bidders for fed cattle in the region. In other words, there only would be one bidder if JBS prevails. ‘Potentially, JBS could choose to divest one of the two plants," Aslam said in a note to investors. "Likely buyers would include Tyson Foods and Cargill." Opponents of the JBS deals applauded the DOJ's treatment of the National Beef merger but had hoped for the same in regards to Smithfield. ‘We are grateful that the Justice Department and State Attorneys General have considered our concerns and are taking meaningful action to protect US cattle producers and consumers against the abusive market power that can result from industry concentration', R-CALF USA president/region VI director Max Thornsberry said in a statement.

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