Tuesday, May 08, 2007

U.S. Will Not Challenge Combination of Pork Packers/Producers

This posting was written by Jeffrey May, editor of CCH Trade Regulation Reporter.

The Department of Justice Antitrust Division closed its investigation of the proposed combination of two pork packers and processors, after concluding that the transaction was unlikely to harm competition, consumers, or farmers.

As a result, Smithfield Foods Inc—the largest hog producer and the largest pork packer and processor in the United States—may proceed with its acquisition of Premium Standard Farms Inc.—the second-largest hog producer and the sixth-largest pork packer and processor in the United States.

Continued Significant Competition

The Antitrust Division concluded that the merged firm would face significant competition in the sale of fresh and processed pork from its national competitors, such as Tyson, Swift, Excel/Cargill, Hormel, and Seaboard Foods.

In addition, farmers who sell hogs or hog-raising services to the merged firm would have competitive alternatives that would deter the merged firm from lowering prices paid to the farmers, according to the Antitrust Division's statement.

“Second Request”

It took more than eight months to receive clearance for the transaction from the Antitrust Division. The merger was announced in September 2006. In November 2006, the Antitrust Division issued a “second request” (or request for additional information about the transaction) under the premerger notification requirements of the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976.

The effect of the second request was to extend the waiting period imposed by the HSR Act until 30 days after Smithfield and Premium Standard Farms substantially complied with the government's request.

When Smithfield and Premium Standard Farms certified substantial compliance with the government's request in February 2007, they agreed to give the Antitrust Division 60 days from that point to review the transaction and an additional 30 days thereafter for review should the Antitrust Division deem it necessary. The Antitrust Division exercised its option to take the additional 30 days. The parties closed the deal on May 7, the day the additional 30-day period would have expired.

Text of the May 4 statement will appear in CCH Trade Regulation Reports.

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