Processing Magazine

Regulators sue JBS, National Beef over deal

October 22, 2008

The Associated Press reports that regulators have filed a lawsuit to block the world''s largest beef packer from buying the nation''s fourth-largest beef processor, saying such a deal could push up costs for consumers and drive down prices paid to ranchers and feedlots. The Department of Justice and attorneys general for 13 states filed the suit against Brazilian beef producer JBS S.A. and National Beef Packing Co. of Kansas City, Mo. In March, JBS had said it would acquire National Beef in a $560 million stock-and-cash deal, which would make it the nation''s largest beef processor. It also announced a deal to buy Smithfield Beef Group Inc., the nation''s fifth-largest beef producer, for $565 million. The Department of Justice said it is not challenging that deal, only the deal with the larger player, which would combine two of the top four U.S. beef packers. Grocers, food service companies and ultimately, consumers will likely have to pay higher prices for beef if JBS'' buyout of National Beef were to go through, according to filings in U.S. District Court in the Northern District of Illinois. The suit said the deal would put more than 80 percent of domestic fed cattle-packing capacity in the hands of three companies -- JBS, Tyson Foods Inc. and Cargill Inc. Regulators estimate if JBS were allowed to buy National, it would have annual sales of more than $14 billion and the ability to slaughter more than one-third of U.S. fed cattle-packing capacity, at about 40,000 head of cattle a day. The combination would not only lead to higher retail prices for U.S. consumers but also lower wholesale prices for cattle producers, ranchers and feedlots, the suit said.