Date: November 7, 2006 Lincoln, Nebraska Contact Information: Fred Stokes, 662-476-5568 or 601-527-2459 Michael Stumo, 413-854-2580
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OCM Meeting with U.S. Dept. of Justice
Delays Smithfield Acquisition
The U.S. Department of Justice Antitrust Division issued a “Second Request” for information to Smithfield Foods, Inc. and Premium Standard Farms, Inc. (PSF) after a meeting with Organization for Competitive Markets officials. The Second Request delays the Smithfield acquisition of PSF until at least 30 days after the companies “substantially comply” with the additional request for information. “OCM met with antitrust lawyers at the Department of Justice in October to express our concerns about the likely anticompetitive effects of the acquisition,” said Michael Stumo, OCM general counsel. “We are unable to find any benefits from the deal. The sole reason for the acquisition is Smithfield’s desire for increased market power.” Smithfield and PSF jointly announced their agreement on September 18, 2006. The Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires companies with large merger or acquisition plans to submit antitrust-relevant information to the U.S. Department of Justice. The companies subject to the law cannot complete the deal until the federal law’s timelines expire. “The Department of Justice had 30 days to request additional information about the Smithfield deal if there were concerns,” continued Stumo. “Our concerns focus upon competition for hogs in the Northern Missouri region and the Southeast U.S., as well as the companies’ control of hog genetics.” The only major packing plants in the Southeast U.S. are owned by Smithfield and PSF. Smithfield owns plants in Smithfield, Virginia and Tarheel, North Carolina, while PSF owns a plant in Clinton, North Carolina. This is a classic “two-to-one” merger which would leave only Smithfield as a hog sales market outlet. “Smithfield should simply be prevented from becoming the monopoly pork packer in the Southeast U.S. region,” said Stumo. The second packing plant owned by PSF is in Milan, Missouri. It is within the area in which Smithfield’s existing plants can buy hogs. Producer choice and competition will be severely reduced in Northern Missouri, Southeast Nebraska and Northeast Kansas if the deal goes through. “OCM will be increasing its opposition to the Smithfield-PSF deal,” concluded Stumo. “The only rational decision for the U.S. Department of Justice is to block the merger. Smithfield will remain the number one pork packer in the world, and the number one pork producer in the world even if the company does not swallow PSF.” |
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The Organization for Competitive Markets is an agricultural free market and competition think tank working for honesty, prosperity and economic liberty for farmers, ranchers and rural communities.