DOJ: Sale of Tyson chicken facility 'unlawful'
May 11, 2011
by Bryan Salvage
WASHINGTON – The Department of Justice filed a civil antitrust lawsuit May 10 challenging George’s Inc.’s acquisition of Tyson Foods’ Harrisonburg, Va., chicken processing complex. The acquisition eliminates substantial competition between the two companies for the procurement of services of chicken growers in the Shenandoah Valley area, the DOJ charged.
Filed in US District Court in Harrisonburg, DOJ’s lawsuit requests the court declare the acquisition to be unlawful under the antitrust laws and order appropriate equitable relief, such as divestiture of the Harrisonburg complex.
“The department’s lawsuit alleges that George’s acquisition of Tyson’s Harrisonburg chicken processing facility would reduce growers’ ability to receive competitive prices for their services,” said Christine Varney, assistant attorney general in charge of the DOJ’s Antitrust Division. “America’s farmers deserve competitive prices and terms for the sale of their services, and the Antitrust Division will vigorously pursue anticompetitive acquisitions that stand in the way of achieving that goal.”
Before the acquisition, three chicken processors – Tyson, George’s and JBS/Pilgrim’s Pride – competed in Virginia’s Shenandoah Valley region for the services of local chicken growers. By combining the Tyson plant with George’s Edinburg, Va., operations, the sale decreased the number of processors in the area to two, reducing competition for grower services, DOJ claims.
Springdale, Ark.-based Tyson Foods is the largest chicken processor in the US, with output of more than 205 million lbs. of chicken per week. JBS/Pilgrim’s Pride, based in Greely, Colo., is the second-largest chicken processor in the US, with output of more than 160 million lbs. of chicken per week. Springdale, Ark.-based George’s is the 15th largest chicken processor in the US, with output of more than 20 million lbs. of chicken per week. In addition to its Shenandoah Valley operations, George’s processes chicken in Springdale, Ark., and Cassville, Mo.
On March 18, Tyson and George’s announced the acquisition. But after learning of the proposed acquisition, DOJ’s Antitrust Division opened an investigation into the proposed deal. The department sought information on the potential competitive effects of the transaction, and George’s proposed business justifications for purchasing the Edinburg plant. On May 7, despite the parties’ awareness of the department’s serious antitrust concerns about the transaction, and without providing a response to the information requested by the department, George’s and Tyson entered into an asset purchase agreement and simultaneously closed the transaction.
Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, which requires companies to notify and provide information to the department and the Federal Trade Commission before consummating certain size acquisitions, this acquisition was not required to be reported. The purchase price of the transaction was less than the minimum reporting threshold.
“This lawsuit is a blatant example of government overreach that could end up hurting the people it purports to protect,” said Gary George, chairman and CEO of George’s. “The DOJ is trying to stop our small company from buying a business and making it better. We believe our ownership of the Harrisonburg poultry complex will actually benefit the employees, poultry farmers and the community.”
George said his company is honoring and extending the contracts Tyson had with local poultry growers and have retained substantially all of the people who were employed by Tyson. “In fact, we plan to gradually increase poultry production in the Harrisonburg complex, using more of its existing capacity,” he added. “This is expected to benefit growers by reducing the amount of time between flocks and benefit plant production employees by giving them more work hours each week.”
George said he is pleased with the positive feedback his company has received from its new employees and contract poultry farmers, as well as community leaders. “Like many of them, we’re disappointed our government is wasting taxpayer dollars in an effort to disrupt a change in ownership that will generate so many benefits,” he concluded.
Tyson Foods’ sale to George’s for the price of $3 million saved an unprofitable poultry operation that was in danger of closing, said Donnie King, senior group vice president of Poultry and Prepared Foods for Tyson Foods Inc. “Such a shutdown would have affected the lives of more than 500 employees and 121 contract growers, as well as local businesses that support and benefit from the poultry complex,” he added. “By trying to force George’s to sell this complex and in effect undo this sale, DOJ is jeopardizing the livelihood of hundreds of people in the Harrisonburg community.”