Beef Packer Abandons Acquistion Challenged on Antitrust Grounds

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

Nearly a year after JBS S.A. announced its intention to acquire National Beef Packing Company LLC, the parties have decided to abandon the transaction, which had been challenged on antitrust grounds by federal and state enforcers. JBS is the world’s largest beef producer and exporter. National Beef is a leading U.S. beef processor.

Termination of the acquisition process is effective February 23, according to statements issued by the companies on February 20. The Department of Justice announced its intention to terminate the pending litigation.

The Antitrust Division welcomed this decision, stating that the acquisition would have combined two of the top four U.S. beef packer and resulted in lower prices paid to cattle suppliers and higher beef prices to consumers.

“The decision to abandon the transaction will preserve competition in the purchase of cattle that has been critical to ensuring competitive prices to the nation’s thousands of producers, ranchers and feedlots,” the Justice Department said in a February 20 announcement. “It will also preserve competition in the sale of boxed beef to grocers, food service companies and ultimately American consumers.”

Enforcement Action

On October 20, 2008, the U.S. Department of Justice Antitrust Division and 13 state attorneys general filed an action challenging the transaction in the federal district court in Chicago. The suit alleged that the proposed transaction would have led to a fundamental restructuring of the U.S. beef packing industry, by combining two of the top four U.S. beef packers.

Four more states were later added as plaintiffs. The parties were granted to stay of the litigation in December to explore the possibility of a settlement.

The Justice Department said that JBS's acquisition of National Beef would have placed more than 80 percent of domestic fed cattle packing capacity in the hands of three firms: JBS, Tyson Foods Inc., and Cargill Inc. The acquisition allegedly would have lessened competition among packers in the production and sale of USDA-graded boxed beef nationwide.

The action further alleged that JBS's acquisition of National would have lessened competition among packers for the purchase of cattle ready for slaughter in the High Plains, centered in Colorado, western Iowa, Kansas, Nebraska, Oklahoma and Texas, and the Southwest.

Decision to Terminate Acquisition

“JBS endeavored to encounter a solution with the parties involved but in the absence of satisfactory conditions decided not to follow on with the acquisition,” the Brazil-based company said in a statement.

In October 2008, JBS completed its acquisition of the beef unit of the Smithfield Group, headquartered in Wisconsin, as well as the company's feedlot operations known as Five Rivers, based in Colorado. Smithfield was the fifth-largest beef packer in the United States.

In announcing its proposed acquisition of National Beef in March 2008, the company said the transaction "represent[ed] the building of a sustainable beef’s slaughtering, producing and trading platform in the United States of America and Australia, which began with the acquisition of Swift & Co. in July, 2007.” When JBS acquired U.S.-based Swift, it claimed that the transaction created the world’s largest company in the beef sector.

The company’s statement on the termination of the acquisition appears here. The Department of Justice news release appears here.