NEW YORK, New York — Meat packing firm IBP Inc. filed a lawsuit March 30 to force poultry giant Tyson Foods to honor a $3.2 billion (US) merger agreement the poultry giant terminated the day before.
“Tyson’s actions are completely unjustified by anything that has transpired and we will do what is necessary to protect our shareholders and our company,” said Robert Peterson, IBP’s chair.
“We can only speculate that this is a classic case of buyer’s remorse.”
The lawsuit is the beginning of what some legal experts believe will be a prolonged legal tussle as the two companies sort through a nearly four-month engagement that ended suddenly following allegations of improper inducement and the withholding of important financial information.
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“Both sides appear to be preparing themselves for lawsuits here,” said one legal expert who asked not to be named.
At the heart of the dispute is a United States Securities and Exchange Commission probe into accounting irregularities at IBP’s DFG Foods unit, which it acquired in 1998. The probe started around the same time Tyson agreed to a merger.
The investigation ultimately resulted in IBP taking two separate charges totaling $111 million (US). DFG’s financial problems also forced IBP to restate its results for the first three quarters of 1999.
Below expectations
The company said its 2001 first-quarter profit would fall well short of analysts’ expectations. However, that shortfall was blamed mainly on higher cattle prices, and the firm gave no indication the DFG probe would impact further financial results this year.
IBP’s lawsuit says Tyson officials were provided routine and accurate updates of the ongoing DFG investigation. IBP claims it informed Tyson in the days leading up to the merger agreement that a write-down of $35 million or more would result from DFG’s troubles.
But Tyson said it terminated the merger agreement because it relied on “misleading information” as part of its due diligence.
