Groups See Competitive Threat In Tyson Foods' Deal for Hillshire

by Marty Cook  on Friday, Jul. 25, 2014 1:20 pm  

A coalition of 82 farm, consumer and community groups urged the U.S. Justice Department to extend its antitrust division’s review of Tyson Foods Inc.’s $8.55 billion deal to acquire Hillshire Brands Co. of Chicago.

The groups sent a co-signed letter (PDF) Thursday to William Baer, the assistant attorney general of the Antitrust Division of Department of Justice. The letter said the merger would “substantially lessen competition, or tend to create a monopoly,” which is forbidden by Section 7 of the Clayton Act.

Tyson of Springdale outbid Pilgrim’s Pride of Greeley, Colorado, for Hillshire, eventually agreeing to pay $63 per share for Hillshire’s 124 million outstanding shares while assuming $553 million in Hillshire debt. 

Hillshire has top brands such as Ball Park hot dogs and Jimmy Dean sausage.

“Consumers have witnessed an onslaught of food company mergers over the past few years that reduced consumer choices and contributed to higher grocery store prices,” said Wenonah Hauter, executive director of Food & Water Watch, one of the letter’s co-signers. “The Justice Department should not rubber stamp a $9 billion hostile takeover by America’s biggest meat company that is not in the best interest of consumers or farmers.”

The letter said the merger, if completed, would hurt hog farmers, consumers and food manufacturers by creating a company with more than $38 billion in annual sales. Tyson is the world’s largest meat and poultry company, and Hillshire is ranked 11th.

The letter criticized several possible consequences of the merger. It said it would likely raise prices and reduce choices for consumers through reduced competition in segments such as meat and processed meat, frozen food and breakfast and lunch meat.

The groups asserted the merger would give Tyson undue influence in the hog slaughtering market, where the company already has more than 17 percent of the national slaughter capacity. Combining Tyson and Hillshire, which operated the second largest sow-packing plant in the U.S., would give the merged company too much leverage in the market.

“Fewer buyer of hogs and sows result in a less competitive market for family farmers,” said Roger Johnson, the president of the one of the letter’s co-signers National Farmers Union, in a statement. “The rapid consolidation of market power in the hands of just a few pork processors resulted in the loss of more than 90 percent of all hog farms since 1980. Tyson’s takeover of Hillshire certainly warrants further investigations by the Department of Justice and should be stopped. It’s time for the Justice Department to enforce our anti-trust laws.”

The groups also assert that having more leverage in the pork market would benefit Tyson in the beef and chicken markets, as well. Tyson could then damage Hillshire’s competition in markets where Tyson supplies products because the company could charge higher prices or limit access.

“The proposed merger would significantly impair competition throughout the hog and process pork marketplace, harming farmers, consumers, rival processors and rural communities,” the letter states. “The Department of Justice must not grant an early termination of the merger review.”



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