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Tyson Foods Victorious in IBP Bidding War 

Now Nation's No.1 Beef, Poultry Processor

Agribusiness Examiner N.101 11jan01

Frustrating efforts by Smithfield Foods, the nation's largest pork producer, Tyson Foods Inc., the nation's largest poultry producer, has agreed to buy IBP Inc., the nation's largest beef processor for $4.7 billion in cash, stock and debt.

Tyson will pay $30 for each IBP share, approximately half in cash and half in stock and also will assume about $1.5 billion in IBP debt and other obligations.

"The acquisition will make Tyson the biggest meat producer in the U.S. by far," Christine McCracken, an analyst at Midwest Research, told Bloomberg News' Susan Decker. "There will also be fewer regulatory concerns with this combination than if Smithfield had bought IBP."

The combination of Tyson and the Dakota Dunes, South Dakota-based IBP, Decker reports, will create a company with more than $23 billion in annual revenue. Tyson said the purchase would add to earnings by more than 15%.

Robert Peterson President and CEO of IBP told Successful Farming's Dan Looker the acquisition will help feeders by giving the combined company a greater portfolio of protein products to sell to grocery chains. IBP has already entered that market with its new Thomas E. Wilson label.

Peterson said the decision of IBP shareholders to accept the purchase over a rival bid from Smithfield Foods was "numerical," based on the assumption that a Smithfield purchase would face longer regulatory delays than a deal with Tyson and on the time value of money during that delay. It amounted to about a $2? a- share difference in favor of Tyson, he said.

Tyson shareholders, however, are wary of management's expectation of a 15% earnings increase, primarily because of the increased debt being taken on. Yet, Tyson CEO John Tyson told Barron's last week the stock-market action reflected arbitrageurs selling Tyson shares and buying IBP's, positions likely to be unwound by February 16, when he expects the deal to close.

Beyond this short-term phenomenon, Tyson says, the combined company should achieve maximum profitability in 21 months, which should push the stock up to 15-18. "I'd be disappointed if we're not in that range," he says.

While the market gave the deal a thumbs-down, reports "Commodities Corner" columnist Cheryl Strauss Einhorn, street analysts who cover Tyson and IBP almost uniformly like it. Len Teitelbaum of Merrill Lynch (which helped advised Tyson) estimates the combined company should have $1.6 billion in sales in 2002, the first full fiscal year the two companies operations will be combined.

"That means on an earnings basis, given that Tyson has historically sold at 8.4 times earnings before taxes on its own, and that the new company should trade at 10 times earnings, the stock should be worth $19 per share," he says. "So this is a cheap stock on an earnings basis."

Teitelbaum also notes that, strategically, "the deal will recast the rules of marketing meat to retailers." As the largest U.S. meat producer after the combination, Tyson will have more clout in the consolidating retailing environment. That will be increasingly important as Wal-Mart, already the nation's No. 1 retailer, aims to capture 20% of supermarket sales. As he

wandered through a Wal-Mart recently, Tyson reckoned the combined Tyson-IBP would get 100 feet of product space in the meat department. "There is no company who commands that kind of space in a grocery store," he brags.

According to the Associated Press, the new mega-meat company would control 30% of the beef market, 33% of the chicken market, and 18% of the pork market.

Whether Tyson can fully capitalize on its IBP purchase hinges largely on

whether it can Tyson-ize beef and pork, according to Jeffrey G. Kanter, an analyst at Prudential Securities in New York, "This is a very big bet by Tyson."

As Scott Kilman of the Wall Street Journal observes: "When it comes to marketing and product development, the nation's meatpackers are about two decades behind chicken processors. They've been so focused on being the most efficient slaughterers of hogs and cattle that they even left it up to ranchers and hog farmers to pay for ad campaigns such as "Pork. The other white meat" and "Beef. It's what's for dinner."

In the past three years, however, IBP has spent about $1.8 billion acquiring companies that turn meat into everything from deli products and pizza toppings to beef kabobs. IBP is test-marketing seven microwavable roasts in Indiana and Michigan grocery stores under the label Thomas E. Wilson, a pioneering meat executive from the early 20th century.

But, as Kilman notes, "90% of the beef and pork coming out of IBP slaughterhouses still ends up in front of consumers the same way it has for decades: an anonymous slab of raw meat. As a result, IBP's bottom line depends on forces largely out of its control --- the ebb and flow of livestock cycles."

At the same time, "we're seeing chicken fatigue," says Charles K. Levitt, senior livestock analyst at Alaron Trading Corp., a Chicago commodity-forecasting concern. Consequently, by Tyson acquiring IBP it becomes much less dependent on chicken, which would account for only 26% of the revenues of the combined operations.

Likewise, many American food companies such as Tyson is under pressure to expand fast. The top five supermarket chains control nearly half of U.S. grocery sales, compared with 30% some five years ago, according to industry sources, and their desire to streamline supply lines is forcing a consolidation wave among food manufacturers.

By swallowing IBP, Kilman reports, the nation's biggest beef processor and No. 2 pork processor, Tyson would be able to handle far more of the meat needs of retailers. Tyson would have the capacity to churn out about 18.5 billion pounds of chicken, beef and pork a year, or nearly a quarter of what the U.S. meat industry produces, estimates Mr. Levitt.

Tyson in recent years has operated on the fringe of the beef and pork business, but essentially abandoned any efforts to establish itself as a major player when it became clear that the Springdale, Arkansas.-based corporation did not have sufficient market muscle to compete against industry giants like IBP. In the early 1990s Tyson considered buying IBP, but opted not to pursue a transaction since it had just completed a $1.5 billion purchase of rival Holly Farms.

As the Wall Street Journal's Nikhl Deogun notes the sale of IBP to Tyson marks the end of a strange takeover saga that started three months ago when IBP's board accepted a $22.25-a-share buyout bid from management and Donaldson, Lufkin & Jenrette Inc., IBP's longtime investment banker. The offer was widely criticized as being a sweetheart deal and was topped six weeks later with an unsolicited bid from Smithfield that valued the larger IBP at $25 a share in stock.

Tyson joined the fray one month ago with $26-a-share bid in cash and stock, which it later sweetened to $27. Smithfield had offered $30 a share in stock, and Tyson had sweetened its proposal again to $28.50 a share in cash and stock. At that point, it appeared that Tyson had a deal sewn up, but Smithfield upped the ante, offering $32 a share.

That forced Tyson to sweeten its bid one last time, to $30 a share in cash and stock. The stock portion of Tyson's bid is subject to a maximum exchange ratio of 2.381 of its class A shares for each IBP share and a minimum exchange ratio of 1.948 shares if Tyson's average trading price for an agreed-to period of time is outside the range, or "collar," of $12.60 to $15.40.

IBP shareholders, Deogun concludes, who were upset at the management buyout bid, will likely be delighted with the Tyson offer, which is nearly 35% higher than what the financial consortium had offered. That said, the consortium, led by DLJ, nevertheless stands to make a pretty penny now that its transaction with IBP has been terminated. Under terms of its original agreement, DLJ, which is now owned by Credit Suisse Group's Credit Suisse First Boston unit, will collect a breakup fee of $59 million, plus expenses.

At the same time, as the Omaha World Herald's Bill Hord notes, Smithfield, which lost to Tyson in its bid to buy IBP Inc., sold 2.56 million shares, or 37% of its 6.96 million-share stake in IBP, according to a regulatory filing.

Smithfield, losing the auction meant winning a profit on an investment in IBP dating to 1999. "There's no reason for Smithfield to hold IBP anymore," said Credit Suisse First Boston analyst David Nelson. "They accurately identified an undervalued asset and profited handsomely." Smithfield's gain on the investment comes to about $1.15 per Smithfield share, after tax, according Nelson, who estimated that the company paid an average of about $15 a share for its stake in IBP.

TYSON FOODS IBP PURCHASE: SO THEY SAY!!!

"It took my father 30 years to get to 25% market share in the poultry industry. For us to go and do this any other way would have taken 10, 15, or 20 years." --- John Tyson, chairman of Tyson Foods Inc., in describing the IBP purchase as a "once-in-a-lifetime opportunity."

* * *

"The landscape is not going to change, there is no overlap whatsoever." --- John Tyson told CNBC

* * * "There isn't anything about Tyson that deserves more paperwork. There's no overlap. There's no antitrust issue here. . . Tyson has no intention of integrating vertically (into IBP's livestock suppliers) and we need every one of our feeders, whether it be cattle or hogs. To the public, to the livestock industry, this will be seamless. They'll never know it happened after it's done," --- Robert Peterson President and CEO of IBP, in relating to Successful Farming's Dan Looker how he expected the purchase of IBP by Tyson Foods to ultimately be approved by federal antitrust regulators after a period of "political posturing" in Congress.

* * *

"They have done great things with chicken and have made it a household commodity. I would hope that they would bring that expertise to the pork industry. There are going to be more pigs going to market, so we have to make sure that we have the capacity. We don't want anyone to close plants." --- Barb Campbell Determan, a pork producer from Early, Iowa., and president-elect of the National Pork Producers Council expressing cautious optimism about Tyson's increased involvement in the pork.

* * *

"Tyson has said it will not pursue vertical integration. We'll take them for their word. That's a tradition in this industry." --- J.D. Alexander, a cattle feeder from Pilger, Nebraska and Nebraska Cattlemen president.

* * *

"It's real concentration of decision making into a few hands, there's no doubt. But the Tyson people have proven they are really good marketers. To the extent they can do a better job of marketing beef, it will be a plus for our industry. I don't think we have to worry that Tyson is doing this to sabotage beef, simply because it has put more than $3 billion of its own money on the line.

"However, there can be some concerns about how company resources are allocated among its divisions. On one hand, you wonder about the potential for unintended consequences when decisions have to be made about building a poultry or a beef facility, for example. Similarly, when decisions are to be made about spending money for advertising campaigns, one might wonder if they'll make the same decisions that they would if they were independent, competing companies." --- Dave Burkholder, Nebraska Cattlemen president-elect.

* * *

"We have already contacted the Justice Department about looking into the merger very carefully. Not only to look at its effect on consumers but also its effect on producers." ---- Mary Kay Thatcher, deputy director of government relations at the American Farm Bureau Federation.

* * *

"Hard-pressed family farmers and ranchers are not cheering one bit. How much more concentrated do these agriculture markets have to become before we demand strong federal anti-trust action? The Tyson-IBP merger would represent unprecedented agricultural concentration.

"This merger would create a company with control over 30% of the beef market, 33% of the chicken market and 18% of the pork market." --- Senator Paul Wellstone (Dem-Minnesota) in pledging to push the Bush Administration's Department of Justice to scrutinize the merger.

* * *

"I'm sorry to say that she mostly just listened. She didn't say a lot. She won't be able to get away with that when she appears before the [agriculture] committee." --- Sen. Charles E. Grassley, Rep.-Iowa, when asked how Secretary of Agriculture designate Ann Veneman responded to concerns about the merger.

* * *

"I also urge you to consult with the U.S. Department of Agriculture during your antitrust review so that you can better understand the ramifications of such a merger on our family farmers and producers." --- Sen. Charles E. Grassley, Rep.-Iowa, in a letter to Attorney General Janet Reno expressing "serious concerns" about the merger,

* * *

"National Farmers Organization encourages President-elect George Bush and his new Attorney General to rigorously examine the fallout of a Tyson - IBP merger on independent livestock producers. A Tyson buyout of IBP would create a pork, beef and poultry powerhouse that could not only control the world's red and white meat industry, but also drive independent producers completely out of business. We support all efforts to protect the nation's farmers and ranchers who produce food for America's table, and we certainly support Senator Grassley's efforts to stop the agricultural concentration juggernaut." --- Paul Olson, National Farmers Organization President

* * *

"This bidding war over IBP has filled the pockets in the board rooms, but it leaves little on the table for rural America. Now is the time for the Justice Department to take action to stop this anti-competitive move." --- Leland Swenson, National Farmers Union President.

* * *

"Considering the business philosophy of Tyson, farmers are worried about the specter of total vertical integration in hogs and cattle by this new firm where there is no room for the independent producer. Tyson is infamous for engineering the industrialization of the poultry sector and egregious contracting practices with farmers.

"Consumers may even have more reason to be alarmed by the Tyson deal because of Tyson's already dominant position in poultry. The great fear is that Tyson will be able to leverage its market power in the markets of beef, poultry, and pork, to raise retail prices, limit consumer choices, and foreclose competition." --- Doug O'Brien, associate counsel for Organization for Competitive Marketing.

* * *

"This Tyson deal provides more evidence that the rapid consolidation of the meat processors simply must be stopped. How are farmers supposed to sit at the bargaining table with a firm so big that it is the major player in beef, pork, and poultry? Consumers also should be concerned. There's no doubt this deal will restrict their choices at supermarkets. And given the concentration of firms in food retail, its likely that if a new major meat firm raises prices to retailers, the retailers will simply pass through the price increase to consumers." --- Fred Stokes, president of the Organization for Competitive Marketing

SETUP ROLE OF THE CLINTON ADMINISTRATION IN TYSON FOOD-IBP PURCHASE SUGGESTED

As the size and scope of Arkansas' Tyson Foods, plans to buy IBP, the nation's largest red meat producer for $3.2 billion dollars was being analyzed by the nation's media and business press last week News Max's Carl Limbacher was reporting on a curious history between the two corporate giants that might be worth further exploration by federal investigators.

He notes that the most recent purchase by Tyson of IBP consummated a relationship that began with another Tyson takeover in 1997.

It was at that time that Tyson's Arkansas neighbor Hudson Foods, a rival chicken processor with its own beef division, was the object of attention by Tyson. However, Hudson wasn't interested --- until the Clinton Agriculture Department stepped in to police an E. coli outbreak at one of Hudson's plants.

On August 12, 1997, Hudson issued a recall for 20,000 pounds of frozen hamburger when 16 people were sickened --- none fatally --- after eating undercooked burgers. Clinton Agriculture Secretary Dan Glickman later determined the meat was contaminated by a potentially deadly strain of E. coli. (Issue #8)

The Arkansas Democrat-Gazette described what happened to Hudson Foods next:

"Agriculture Secretary Dan Glickman used strong terms to characterize the Hudson investigation, which started with five investigators dubbed a SWAT team. It culminated in a 'non-negotiable' gauntlet for Hudson to recall that product and close the Columbus plant --- an action that the USDA had no power to enforce.

"The agency can only withdraw its inspectors," the Democrat-Gazette added, "but that has the same hostage holding results for companies who can't sell their products without a government inspection seal."

By the time Glickman's crew was finished, Limbacher notes, Hudson had to recall a crippling 25 million pounds of beef, costing the company its largest customer, Burger King.

The Wall Street Journal also took note of the Clinton administration's heavy-handed tactics.

"Hudson's rapid tailspin has stunned some meat industry executives, who blame the record beef recall pushed by the Agriculture Department for breaking the back of Hudson. `What happened to Hudson Foods doesn't make sense,' said Patrick Boyle, president of the American Meat Institute, a meatpacking trade group. ..."

The Journal also noted that Hudson's brush with Glickman's inspectors made Tyson's buyout bid an offer the company couldn't refuse.

"Hudson and Tyson, which are neighbors in Northwest Arkansas, had spoken casually about a merger 'for about ten years,' but the decision to sell out now was prompted by the beef recall . . . The move by Tyson of Springdale, Arkansas would enlarge its position as the nation's largest poultry producer . . The acquisition 'adds beautifully to Tyson's distribution and production system,' said Leonard Teitlebaum, analyst at Merrill Lynch & Co."

The only problem was that Tyson didn't want to absorb Hudson's beef-processing division --- the now-shuttered operation that made it necessary for Hudson to sell in the first place.

IBP, which had been a major supplier to the Hudson plant, took the now defunct beef plant off Hudson's hands for what the Journal described as "an undisclosed amount."

But the story continues, Limbacher notes, for in the intervening years, IBP's "good deed" seems to have been rewarded, often through the good graces of the Clinton administration's Immigration and Naturalization Service (INS).

One way the beef giant had become dominant in its field was by recruiting low-skilled non-union foreign workers to staff its slaughterhouses, where the work is always arduous and often dangerous. IBP had been actively recruiting laborers from all over the world for years.

A little more than a year after IBP helped facilitate Tyson's takeover of Hudson, the Journal explored the company's practice of hiring foreign workers under the headline: "With Help from INS, U.S. Meatpacker Taps Mexican Work Force."

"So why isn't the INS turning its searchlights on IBP's Mexico campaign?," the Journal asked. "Why, instead, is the federal agency hailing IBP as a model of cooperation? The answer reflects the complex interplay between public policy, a company's economic needs and a government agency's political interests," reported the paper.

"Complex interplay?" Limbacher scoffs, "basically, in 1996 the Clinton INS offered the beef giant a program called Basic Pilot, which was designed to help big employers of foreign labor avoid undocumented workers and comply with immigration laws."

But in practice, he adds, Basic Pilot often meant that immigration laws were ignored altogether. The meatpacking giant, which was hit by INS raids six times between 1994 and 1997 (the year of the Hudson buyout), hasn't had a single INS raid since. John Nathan, the INS official overseeing the program, told the Journal that "the INS assumes a high degree of compliance" with Basic Pilot.

"And IBP's good fortune didn't end there," Limbacher continues, "turns out the Clinton administration's Bosnian refugee resettlement efforts also helped to keep labor costs down. Since 1995, for instance, the town of Waterloo, Iowa --- population 65,000 - has been swamped with 6,000 Bosnian refugees, many of whom wound up working for the No. 1 local employer, IBP."

Until recently, IBP's 2,000-strong Waterloo workforce was one-third Bosnian. Most refugee families that settle there have a family member who at one time or another worked for the meatpacking giant. In fact, the meatpacking industry has a history of recruiting on the ground in Yugoslavia. But during the Clinton years, companies like IBP haven't had to travel that far.

Since 1995, the Clinton INS has resettled over 80,000 Balkan refugees, mainly Bosnian Muslims, primarily in America's Midwest. The immigrant deluge has earned Iowa the distinction of being the only state in the union with its own refugee bureau.

So, as Limbacher concludes his intriquing story, "perhaps it's fitting that IBP should finally be absorbed by Tyson Foods, with its long history of financial backing of both Bill and Hillary Clinton, especially since it was the Clinton Agriculture Department's heavy hand that brought the two meat processing giants together in the first place."

CONVICTED TYSON FOOD EXECUTIVE PARDONED BY DEPARTING BILL CLINTON

Archie Schaffer III, the chief spokesman for Tyson Foods, the nation's largest poultry producer, was convicted by a jury under a 1907 law of trying to influence agricultural policy by arranging for former USDA Secretary Mike Espy to attend a Tyson birthday party in Arkansas in 1993. The sentencing of Schaffer was one of the final items in Independent Counsel Donald Smaltz's six-year, $23 million investigation of Espy. Another jury acquitted Espy in December 1998.

Last week Bill Clinton in the waning days of his presidency and who throughout his personal and political life has numbered Don Tyson and his Arkansas company as a key supporter and contributor, granted a pardon to Schaffer.

Arkansas Republicans and Democrats had urged Clinton to pardon Schaffer, arguing the spokesman was convicted under an obscure law by an independent counsel seeking to build a case against Espy. While the federal judge who oversaw the case said he believed Schaffer was innocent and twice tried to acquit him, he was reversed by an appeals court.

Thus, U.S. District Judge James Robertson reluctantly sentenced Schaffer to a year and one day in prison and a $5,000 fine, the minimum that he said was allowed under the Meat Inspection Act. The extra prison day would have made Schaffer eligible for good-behavior credits that could free him nearly two months early, the judge said.

Besides the pardon pleas, Schaffer supporters wrote nearly 100 letters to Robertson asking that he show leniency. Schaffer, the nephew of the former Arkansas governor and U.S. Sen. Dale Bumpers, Dem.-Arkansas, served in Bumpers' administrations and led a business group studying educational reforms during Clinton's tenure as governor.

Pleading guilty to giving Espy $12,000 in illegal gratuities, Tyson Foods, consented to pay the federal government $4 million in fines and $2 million in costs. Tyson chairman Don Tyson and his son John Tyson were also granted immunity from further prosecution.

While the media was reporting simply that independent counsel Donald Smaltz's investigation centered on "favors from large companies with important interests before the government," court papers stated that at the time it was bestowing gifts on Espy, Tyson Foods was urging USDA to go slow on imposing new meat and poultry handling instructions.

Smaltz's office said prompt imposition of the new rule would have cost Tyson Foods $30 million, although ultimately a court order blocked enforcement of the rule. It was also believed that Espy's coziness with Tyson was the reason he hesitated to remove holdover appointees who were helping to block stricter regulation of meat and poultry.

DAN GLICKMAN: BOWS TO CORPORATE AGRIBUSINESS REFUSES TO ANNOUNCE RESULTS OF NATIONAL PORK CHECKOFF REFERENDUM

In a move that symbolizes his entire term of office as the Clinton Administration's USDA Secretary, Dan Glickman is refusing to announce the results of the recent national pork checkoff referendum even though USDA has known the results of the vote since Christmas.

On December 20, the USDA committed to announce the results of the pork checkoff referendum during the first week of January and reconfirmed that commitment as recently as January 3.

The National Pork Producers Council (NPPC) is trying to block the announcement of the vote results, and apparently the termination of the pork checkoff tax, by calling for a government investigation. It has been 14 weeks since hog farmers finished voting in the referendum. In that time, they have paid approximately $14 million to the NPPC and the National Pork Board through the pork tax.

The Campaign for Family Farms led the national petition drive in which 19,000 hog producers called for a vote to end the mandatory pork checkoff. The checkoff voting ended on September 21, in which approximately 30,000 producers participated. The ballots were counted on November 29th. According to the published rules of the referendum, the mandatory checkoff will be terminated if a majority of hog farmers voting, voted to end the pork checkoff.

"We want Glickman to announce the results today, and to abide by the producers' vote. If farmers voted to end the checkoff, Glickman should begin termination procedures now as provided in the rules," says Jim Joens, a Minnesota hog farmer and member of the Land Stewardship Project, speaking on behalf of the Campaign for Family Farms.

"There is absolutely no reason to delay the announcement of this vote," he added. "Hog farmers exercised their democratic right to have this vote to end the mandatory pork checkoff. The USDA and NPPC should stop trying to stand in the way of that."

"Based on the overwhelming number of hog farmers who contacted us during the voting period, we are confident that hog farmers have voted down the mandatory pork checkoff. Why these delays? Secretary Glickman needs to announce the results and honor the mandate of America's hog farmers. No more delays and no backroom deals. Announce the results now," said Minnesota hog farmer Paul Sobocinski, an organizer with the Land Stewardship Project and the Campaign for Family Farms.

Meanwhile, the National Campaign for Sustainable Agriculture in its Year 2000 Annual Meeting endorsed the position that if farmers wanted to hold a referendum on the pork checkoff system, they should be given the right to do so AND have the results of their vote made public by USDA.

Under the pork checkoff system, pork producers are required to contribute 45 cents of every $100 of a pig's value when it is sold to the quasigovernmental National Pork Board, which then gives it to the National Pork Producers' Council for research, education, and promotional services ("Pork, the other white meat.").

The Campaign is urging family farm supporters to call Secretary Glickman at 202-720-3631 and tell him that he needs to: A) Announce the pork checkoff referendum results immediately. B) Honor the hog producers' vote, and begin terminating the pork checkoff tax.

Also the Campaign urges that people call their U.S. Senators and Representatives and request them to call Secretary Glickman and tell him he's got to announce the vote results immediately and abide by the producers' vote. One can reach their U.S. Senators' and Representative's phone numbers by calling the Capitol Hill switchboard at 202-224-3121)

For more information about the pork checkoff referendum contact The Campaign for Family Farms at:

* The Land Stewardship Project (612) 722-6377 * Iowa Citizens for Community Improvement (515) 282-0484 * Missouri Rural Crisis Center (573) 449-1336 * Illinois Stewardship Alliance (217) 498-9707

SMITHFIELD FOODS: JUDGE CITES NATION'S LARGEST PORK PROCESSOR "EGREGIOUS AND PERVASIVE" LABOR LAW VIOLATIONS

Committing "egregious and pervasive" labor law violations, Smithfield Foods Inc., world's largest pork processing plant in Tar Hill, North Carolina, was found guilty December 15 of 36 unfair labor acts in the union elections of 1994 and 1997, including the illegal firing of 11 union workers from the plant and threats from management to close the plant if the union won the election.

According to Judge John West workers had been threatened and improperly interrogated about their union activities, that the company had warned of layoffs and a possible plant closing if the unionization campaign succeeded and that one pro-union employee had been assaulted in retaliation for his organizing efforts.

Workers at the Smithfield plant were so intimidated by management, Judge West declared, that any future election should be held outside the plant and possibly even outside the county because of the company's influence in the area.

A spokesman for Smithfield Foods of Smithfield, Virginia immediately said that it would appeal the judge's findings to the full National Labor Relations Board (NLRB), and that if it failed there, it would appeal to the federal courts. The New York Times reports that the United States Court of Appeals for the Fourth Circuit, a generally conservative bench that hears labor law cases originating in North Carolina, has sometimes reversed pro-union findings by the board.

In his ruling Judge West, working for the NLRB, set aside the results of the most recent company election, in 1997, which the company won with 63% of the vote. His sweeping 436-page opinion also concluded that several of the company's lawyers and managers had lied under oath in hearings on the case and raised the possibility that one lawyer had suborned perjury and that another had knowingly introduced false statements at the hearing.

Lawyers on both sides agree, according to the Times' Kevin Sack, that the appeals process could take years. The company, which had sales of $5.2 billion last year, does not plan to rehire any of the workers until a final ruling is issued, said Jerry Hostetter, the vice president for corporate communications at Smithfield Foods.

Despite this inevitable delay in carrying out the ruling, union officials greeted Judge West's decision jubilantly and said it would give them a significant lift in their effort to unionize the North Carolina plant. North Carolina, with its right-to-work laws against compulsory unionization, is a difficult place to organize. But the union may have reason for hope.

Because the plant is the world's largest pork-processing plant, with more than 5,000 employees, the lack of a union there has depressed wages across the industry, Greg A. Denier, director of communications for the union told the Times.

Denier said he hoped the ruling would buffer Smithfield workers from the company's pervasive influence in Tar Heel and Bladen County. "Smithfield has such power in the community that there is tremendous pressure that they put upon workers," he said.

Also included in the Judge's findings was the fact company officials had sought to scare the plant's sizable Hispanic work force by warning that the union, if successful in organizing the plant, would report workers to the Immigration and Naturalization Service. A New York Times study last year found that labor at the plant was largely stratified by race among white workers, black workers and Hispanic workers and that racial tensions emerged regularly.

Judge West's report is replete with details about how Smithfield fired workers who, he concluded, would not have been dismissed were it not for their union activities. In case after case, Sack reports, he heard testimony from the workers and from company officials and then found that the managers lacked credibility.

The judge aimed particular criticism at the Tar Heel plant's general manager, Jere Null, who he said was "not a credible witness.," concluding that Null was responsible for positioning eight to ten county sheriff's deputies in the plant parking lot on the day of the 1997 election as an intimidation tactic, and he dismissed Null's claim that he did not know in advance about their presence.

"Null not only knew that they were there, Null was responsible for them being there," Judge West wrote. "Null wanted to make a point that the Tar Heel plant was his plant, the union was going to pay a price for its attempt to organize the employees who worked there, and employees who supported the union would have an old-fashioned example of what can occur when they try to bring in a union."

For Smithfield these latest labor law violations come only months after the U.S. Supreme Court, without comment, let stand rulings that held Smithfield liable for numerous violations of the federal Clean Water Act between 1991 and 1996.

Fined $12.6 million for polluting Virginia's Pagan River, a tributary of the James River, with wastewater discharges from two pork-processing plants, Smithfield had claimed that it was unfairly caught in a policy dispute between state and federal regulators.

A federal trial judge and the 4th U.S. Circuit Court of Appeals previously rejected that argument. The Supreme Court appeal had been filed by Smithfield and its two subsidiaries, Smithfield Packing Co. and Gwaltney of Smithfield Ltd.

RECOMMENDED WEB SITE: CORPORATE AGRIBUSINESS RESEARCH PROJECT

Readers of THE AGRIBUSINESS EXAMINER are reminded that past issues of the newsletter can be found at the Corporate Agribusiness Research Project's web site on the Internet. The CARP web site features: THE AGBIZ TILLER, THE AGRIBUSINESS EXAMINER and "Between the Furrows."

THE AGBIZ TILLER, the progeny of the one-time printed newsletter, now becomes an on-line news feature of the Project. In-depth essays dealing with corporate agribusiness activities are posted here periodically.

In "Between the Furrows," besides a modern search engine, there is a wide range of pages designed to inform and educate readers on the inner workings of corporate agribusiness. In addition to CARP's "Mission Statement," "Overview" and the Project director's "Publication Background," the viewer will find a helpful "Fact Miners" page which is an effort to assist the reader in the necessary art of researching corporations; a page of "Quotable Quotes" pertaining to agribusiness and corporate power; a "Links" page which allow the reader to survey various useful public interest, government and corporate web sites; a "Feedback" page for reader input, and a page where readers can order directly the editor's The Corporate Reapers: The Book of Agribusiness.

The CARP web site was designed and produced by ElectricArrow of Seattle, Washington. http://www.electricarrow.com

http://www.ea1.com/CARP/ http://www.ea1.com/tiller/

 

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