WASHINGTON, D.C. — Representatives of three of the organizations that signed a letter to the U.S. Department of Justice (DOJ) expressing concerns about the proposed merger of Tyson Foods and Hillshire Brands aren’t optimistic the agency will heed their request for a thorough review of the transaction.
Tyson and Hillshire officials announced last month Tyson had agreed to purchase Hillshire for approximately $8.55 billion. The cash deal includes all of Hillshire’s outstanding net debt. The deal is expected to close by Sept. 27, the last day of Tyson’s fiscal year.
In a letter sent to the DOJ’s Antitrust Division on July 24, a group of 82 agriculture, rural and consumer organizations said the proposed sale would "substantially lessen competition, or tend to create a monopoly." The letter said the merger should be enjoined by the DOJ and "that the complexity of the merging parties and the interrelationships between Tyson, Hillshire, hog farmers and other rival meat processing companies warrants a thorough review."
The Ohio Farmers Union signed the letter but its president, Joe Logan, said he’s doubtful the DOJ will look more deeply into the proposed merger.
"The federal government has the role to assure markets are open and competitive," he said. "But every indication we’ve had is that they are just inclined to not do anything to preclude this merger and let it go through."
Logan said a number of members of the union are "indignant" the government hasn’t already taken a stronger stance against the proposed transaction. Combining Tyson, the nation’s No. 1 meat and poultry processor, and Hillshire, ranked 11th, "would further reduce competition among buyers of market hogs, lowering farm prices for hog farmers," he noted.
"Competition is an essential element in our so-called ‘free market’ system. Robust competition, among many buyers and sellers, can boost farm prices and also effectively limit price increases for consumers."
Hillshire’s products include Hillshire Farm, Jimmy Dean and Ball Park brands. Hillshire had about $4 billion in sales in fiscal 2013 and has more than 9,000 employees, the company has said.
Tyson had sales of $35.4 billion last year, according to the company. In addition to Tyson products, other brands include Corn King, Lady Aster and Star Ranch Angus beef.
A representative of Hillshire said officials had no comment beyond previously released press statements. A Tyson spokesman said the company would comply with regulatory requirements for the acquisition, but would not otherwise comment.
Attempts to speak with a DOJ representative about the letter and the review process were unsuccessful by press time.
The National Sustainable Agriculture Coalition also signed the letter to the DOJ. Paul Wolfe, policy specialist for the organization, said he’s not assuming the agency will conduct a more thorough review of the proposed sale.
"I’m hopeful that the DOJ will take this seriously, but I don’t know how they’re going to treat it," he said. "I’m not super optimistic, but we’ll keep trying."
Part of the coalition’s platform is to work on issues that impact family farmers, Wolfe noted. "It’s been a longstanding fight for us to ensure these kinds of mergers are given adequate review," he said. "When there’s consolidation in food production and processing, there’s less money going into the pockets of farmers."
The Center for Food Safety, which also signed the DOJ letter, is concerned the proposed merger will be a case of larger companies implementing a "bigger and bigger industrial food model," said Jaydee Hanson, a senior policy analyst with the organization.
"So many of the small farmers are now really once again just contract laborers," he stated. "This will be one less company in the mix, one less voice to say there might be a different way to produce chicken."
The Center for Food Safety is not hopeful about the DOJ’s response, Hanson said, adding he hopes the agency will look at the merger and acknowledge there are reasons for the Clayton Act. Section 7 of the act prohibits mergers and acquisitions where the impact may be to diminish competition or form a monopoly.