Operations at Canada’s largest beef packer are not likely to be affected by an investor group’s bid to buy the parent company, IBP Inc.
South Dakota-based IBP is North America’s largest fresh beef processor and hopes to move more into value-added production.
While Wall Street has been negative about the food producing giant, some analysts argue the company has a bright future as it moves from producing raw products to more processed foods.
“IBP has been a leader in the industry because it has been willing to invest in building the best and most efficient plants,” said Steve Kay, editor of Cattle Buyers’ Weekly based in California.
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IBP purchased Lakeside Packers at Brooks, Alta., four years ago and in 1999 completed $100 million worth of renovations. Most of the investment was spent on converting the plant into one capable of shipping boxed beef, as well as carcasses. It is capable of shipping out 75 container loads of carcass beef and another 18,000 loads of boxed beef every week.
The plant can handle one million head a year, a third of all the fattened cattle in Canada.
Billion dollar deal
Rawhide Holdings Corp., an affiliate of Wall Street investment giant Donaldson, Lufkin & Jenrette Inc. (DLJ), has offered to buy all outstanding shares. IBP’s board approved the deal, valued at $2.4 billion in cash with additional assumption of $1.4 billion in IBP debt.
“DLJ has a long-term association as their bankers. They would not commit all this money to buy IBP if they did not think they had a positive future,” said Kay.
The company must raise more money to increase production for such items as case-ready meat products.
One of its major customers is Wal-Mart, which has become the fourth largest grocer in the United States. Wal-Mart demands meat already cut and wrapped for its combination department and grocery stores.
Kay said it could be several months before anything further happens with the takeover. Some shareholder groups claimed the selling price at $22.25 per share is too low. A more reasonable price is $30, they said.
The National Farmers’ Union has denounced the proposed buyout because DLU also holds stock in Archer Daniels Midland Co.
“This deal between two of the largest agribusiness processors would create a highly concentrated, vertically integrated food production system that would decrease competition and compromise the market power of farmers and ranchers trying to receive fair market prices in an already overly-concentrated industry,” said an NFU news release.
Founded in 1960, IBP opened its first beef plant in western Iowa in 1961.
Known as Iowa Beef Packers, the company built automated meat plants near large supplies of livestock.
