Group opposes JBS plan to acquire XL Foods plants
Dec. 27, 2012
by Erica Shaffer
WASHINGTON – National Farmers Union (NFU) and a coalition of 40 agricultural organizations asked the US Department of Justice to investigate a proposed merger of JBS USA and two US-based beef packing plants owned by XL Four Star Beef, a division of Brooks, Alberta-based XL Foods.
In its letter, the group urged the DOJ to extend the merger waiting period to provide additional time for review of the merger. The group also asked DOJ to request additional information, including cattle-procurement practices, competition levels and the history of JBS’s previous acquisitions of closed packing plants.
"We firmly believe this proposed merger would reduce competition and seriously harm both cattle producers and consumers," the letter states. "We therefore request that no early termination of the antitrust evaluation regarding the acquisition of the two US-based beef packing plants be granted and that the Justice Department make a second request for information to extend the investigation."
A wholly owned subsidiary of Brazil-based JBS SA, JBS USA announced in October the company had reached an agreement with XL Foods, effective immediately, to manage its XL Lakeside beef plant. The plant was at the center of the largest beef recall in Canadian history. In addition to assuming management duties, JBS USA also negotiated an exclusive option to purchase additional XL properties. At the time, Bill Rupp, president and CEO of JBS USA's North America and Australia beef business, said the acquisition would be a "great addition" to the JBS USA's North American portfolio of plants. XL Four Star Beef markets beef products to retail and foodservice operators in the US through a processing facility in Nebraska, according to the XL Foods web site.
“We have eight plants in the US positioned strategically throughout the country. [The Lakeside] plant will offer us great opportunities. I believe it’s a North American market...not a US and a Canadian market," Rupp said in October. "It’s a North American consumer. We find consumers are very similar, have similar expectations on both sides of the parallel.”
However, opponents of the acquisition pointed out that in 2008, the DOJ initiated antitrust enforcement action to prevent JBS USA from acquiring National Beef Packing Company, the fourth largest beef packer in the US.
“The Justice Department must not retreat from the historically significant effort it started in 2008 to curb the pervasive erosion of competition in both the US cattle market and the consumers’ beef market,” the group stated in the letter.