(Adds heavy share trading before announcement, comment from
By Diane Bartz
WASHINGTON Aug 27 Tyson Foods Inc, the
largest U.S. meat processor, on Wednesday won U.S. antitrust
approval for its $8.5 billion purchase of Hillshire Brands Co
To win approval for the merger, the companies agreed to sell
Heinold Hog Markets, the U.S. Department of Justice said. The
attorneys general of Iowa, Illinois and Missouri, all big
hog-producing states, joined the settlement.
"Today's proposed settlement will help ensure that hog
breeders in the United States will continue to receive the
benefits of vigorous competition when selling sows," said Bill
Baer, assistant attorney general for DOJ's antitrust division.
The two companies combined buy about 35 percent of all sows
sold in the United States.
Tyson's share price rallied on the approval, rising as much
as 2 percent before closing at $37.71, up 1.5 percent. Hillshire
closed near steady at $62.96.
But about 10 minutes before the Justice Department announced
the deal, the share prices of both companies dropped sharply and
there was a large increase in stock and options volume,
suggesting that traders were bracing for bad news.
Trading volume for Hillshire totaled 8.07 million shares,
compared with the 50-day average of 2.54 million; of the total,
trading volume, almost 5.5 million came several minutes before
and after the DOJ's release, according to Reuters data.
Springdale, Arkansas-based Tyson is a massive seller of
chicken, beef and pork while Chicago's Hillshire sells packaged
meat brands such as Jimmy Dean, Ball Park and State Fair as well
as bakery products like Sara Lee.
The companies overlap in the business of buying sows when
they are too old to breed, the Justice Department said.
Heinold Hog Markets, which had revenues of $270 million and
has operations in Illinois, Iowa, Indiana, Michigan, Minnesota
and Nebraska, buys the animals from farmers and resells them to
manufacturers. Hillshire buys them to make sausage for its Jimmy
Dean and Hillshire Farm brands.
"Although the sale of sows constitutes a small percentage of
overall revenues, farmers rely on this source of income as an
important contribution to their earnings," the Justice
Department said in a competitive impact statement filed with the
U.S. District Court for the District of Columbia.
That court must approve the proposed settlement.
The deal had came under fire from some farm, consumer and
rural organizations, as well as lawmakers like Senator Charles
Grassley of Iowa, who worried that a larger Tyson will have
power to push down the prices paid to hog farmers and drive up
the prices paid by consumers at the grocery store.
"Because Tyson can align its pork slaughter business with
Hillshire's branded processing business, Hillshire products will
have a leg up on competitors, who will likely have to raise
prices," said Wenonah Hunter, executive director of Food & Water
In a statement, Grassley said that requiring the sale of
Heinold showed the Justice Department "took my concerns into
consideration in regard to the slaughter sow market."
(Reporting by Diane Bartz; Editing by Ros Krasny, Sandra Maler,
Lisa Shumaker and Leslie Adler)