Tyson forced to proceed with IBP merger
Tyson Foods, the largest US chicken producer, last week bowed to a US judge's order forcing it to purchase IBP, US's largest beef producer, and agreed to the merger under the original terms.
Tyson will purchase IBP for about $2.7 billion in cash and stock – a figure that is far lower than the initial offer of $3.2 billion made in December, because of the fall in the value of IBP shares since.
Under the terms of the agreement, Tyson will pay in the region of $25 per share for 50.1% of IBP's 106 million shares. It will then exchange 2.381 of its shares for each of the remaining 49.9 per cent of IBP stock. Industry observers have noted that had the merger gone through before Tyson attempted to back out, IBP shareholders would have received around $30.00 per share.
The Delaware Chancery Court judge concluded that IBP had not misled Tyson about its financial position and that Tyson would therefore have to continue with the transaction. The judgement followed on from IBP’s filing of a suit for completion of the merger after Tyson attempted to back out of the deal in March. At the time, Tyson said IBP had kept it in the dark about a pending Securities and Exchange Commission (SEC) probe into one of its divisions. IBP’s position – which now appears vindicated – was that Tyson had simply got cold feet and was using the investigation as a pretext to have the merger agreement annulled.
With the announcement of the judgement, Tyson said it intends to commence its cash tender offer on July 5, with completion taking place by September 1. The court has set a deadline of November 15 for the merger to be completed.
Said John Tyson, chief executive of Tyson: "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."
Added Dick Bond, IBP chief operating officer: "We at IBP look forward to working with John and the Tyson management team to achieve our vision."
