JBS seeks anti-trust settlement
December 17, 2008
OMAHA (DTN) – Meatpacker JBS S.A., the U.S. Department of Justice and 17 states are asking a federal judge to put the Justice Department’s anti-trust lawsuit on hold while parties negotiate a possible resolution to the case.
Court documents filed in the U.S. District Court in Chicago indicate that packing plants owned by JBS or National Beef could be sold so the Justice Department would allow JBS to move ahead with the acquisition of National Beef.
JBS and National Beef filed a motion Tuesday in the anti-trust case asking the court to stay further proceedings “pending the outcome of certain contemplated discussion between the parties.”
A short time later, the Department of Justices and 17 plaintiff states in the case filed a response stating they would support the stay to “enable the parties to devote the time necessary to explore a possibility of settlement that arose within the past few days.” The Justice Department attorneys stated a stay was needed because the case was on a fast track and the only practical way to devote time to settlement talks was through a stay of proceedings.
“Plaintiffs will need to investigate any series settlement proposal to determine whether it would adequately restore the competition that would be lost if JBS S.A. acquires National Beef,” the DOJ consent stated. “Plaintiffs must ensure that any divesture proposal includes all of the assets necessary for a purchaser to be an effective, independent, long-term competitor…”
Brazilian-based JBS, at the time the nation’s third-largest beef packer, announced in March that the company proposed to buy National Beef Packing, the nation’s second-largest beef packer. Along with that purchase, JBS also bought the Smithfield Beef Group. The buys reflected a rapid expansion by JBS into taking a dominant position in the U.S. beef market after taking over Swift Foods Co. just a year earlier.
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Bill Bullard, CEO of the ranchers’ group R-CALF USA, speculated Tuesday a deal in the case could involve National Beef’s plant in Brawley, CA, or a JBS plant in Tolleson, AZ. By taking over Smithfield Beef, JBS acquired the Tolleson plant, but the Justice Department highlighted in its lawsuit that if JBS also owned the Brawley plant that would effectively mean there’s only one major beef-packer buyer in Arizona and California.
“If a merger occurred in that region, you would have no more competition,” Bullard said. “You will only have one buyer for cattle.”
R-CALF and the Organization for Competitive Markets filed a separate lawsuit to block the merger and have sought to have their case merged with the government’s case, Bullard said. Besides issues with the Southwest, Bullard said cattle producers in his organization are concerned about the impact of the sale of National Beef’s plants in Liberal, KS, and Dodge City, KS.
“While that would not reduce competition to zero, it would greatly diminish competition,” Bullard said.
JBS agreed to pay $465 million in cash and $95 million in stock for National Beef, as well as take over about $400 million in National Beef’s debt obligations, the companies stated when the sale was announced. Combining JBS Swift, Smithfield and National Beef would make JBS the largest beef packer in the country with daily kill capacity of nearly 43,000 head.
The Justice Department sued in October to block the JBS purchase of National Beef after complaints from livestock producers and a hearing in Congress. It was the first anti-trust case filed by DOJ to stop a corporate merger in nearly four years. The Justice Department stated at the time that the proposed deal would result in “lower prices paid to cattle suppliers and higher beef prices for consumers.”
The Justice Department also stated at the time the suit was filed that JBS’s purchase of National Beef “would substantially restructure the beef packing industry, eliminating a competitively significant packer and placing more than 80 percent of domestic fed cattle packing capacity in the hands of three firms: JBS, Tyson Foods Inc., and Cargill Inc. The Department concluded that the acquisition would lessen competition among packers in the production and sale of USDA-graded boxed beef nationwide. The Department also concluded that JBS’s acquisition of National would lessen competition among packers for the purchase of fed cattle – cattle ready for slaughter – in the High Plains, centered in Colorado, western Iowa, Kansas, Nebraska, Oklahoma and Texas, and the Southwest,” Justice officials stated in a news release.
The Justice Department did not challenge JBS’s purchase of Smithfield Beef Group.
Attorneys General from 17 states have joined the Justice the Department in the case. Those states include: Arizona, Colorado, Connecticut, Iowa, Kansas, Minnesota, Mississippi, Missouri, Montana, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Texas and Wyoming.
chris clayton can be reached at email@example.com