The federal Competition Bureau has decided it will not challenge the sale of Tyson Food’s Lakeside Farm to XL Foods.
The deal between the two beef processors is now expected to be complete by mid-March.
The Competition Bureau investigated the possible impact of the sale, which would leave Cargill and XL Foods in control of most slaughter plants in Canada.
Morgan Currie, assistant deputy commissioner with the Competition Bureau, said the major concern from industry wasn’t the sale of Lakeside to XL, but the possibility that the Lakeside plant in Brooks, Alta., would close and the impact U.S. mandatory country-of-origin labelling legislation would have on the Canadian industry.
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“When we went out to the industry, one of the things that was striking to us, with few exceptions, was most people weren’t concerned about the transaction, but the possibility that the Lakeside plant would close if the sale didn’t proceed. The second biggest concern was this mCOOL.”
Currie said the Competition Bureau believes there are enough U.S. companies buying cattle from Canadian feedlots to ensure strong competition, unless the COOL legislation dries up demand for Canadian cattle.
“The big question for us is, we want to understand the outcome of recent U.S. labelling measures and how U.S. packers are going to respond to them, because it’s very important to our investigation who else in the industry is in there buying Canadian cattle and can discipline XL’s ability to depress prices for slaughter cattle.”
The Competition Bureau said it will monitor the beef industry for three years and will go back to XL if the price of beef drops dramatically because of lack of competition.
In June, Tyson announced the sale of Lakeside Farm Industries to XL Foods for $105.5 million, but was contingent on a Competition Bureau approval.
The sale included the Brooks, Alta., slaughter plant, cattle feed yards, fertilizer production facilities and farmland. Between XL’s existing Calgary packing plant and the Lakeside plant, the company has potential to slaughter 6,500 head a day.
Cor van Raay, one of Canada’s largest feedlot owners, said he believes the sale will benefit Canadian beef producers.
“I think this was a good thing. We’re not selling out to an American, but the American is selling out to a Canadian, that’s got to be positive,” said van Raay, who operates feedlots near Iron Springs, Alta.
Van Raay believes the sale will improve competition with Tyson’s Pasco, Washington, plant bidding on Canadian cattle.
“We have no less competition. Pasco will now bid against Lakeside. Right now it’s not the case. Those prices line up the same every week.
“We phone Lakeside for a price and it’s owned by Tyson and we phone Pasco for a price and it’s owned by Tyson. Do you think there’s any competition?”
Stuart Thiessen, a board member with Alberta Beef Producers, said the organization is happy the Brooks plant is going to stay open.
“It’s nice to see a Canadian firm move up to the big stage. We’re cautious regarding the fact we’ve lost competition in the Canadian industry and I think we’re happy they’re going to keep watching it.”
Terry Pugh, executive secretary with the National Farmers Union, said his organization has opposed the purchase of Lakeside, just as it opposed the purchase of Better Beef in Ontario by Cargill in 2005.
“The experience in 2005, when Cargill took over Better Beef was cattle prices in Ontario fell the fastest and the farthest. It’s logical to expect the same thing to happen now.”
Pugh said the federal Competition Bureau has become a joke and should be renamed the Consolidation Bureau. He doesn’t understand why it would allow XL Foods to attain 48 percent of the market share of the beef packing industry, while it also owns auction markets, cattle finance companies and cattle insurance companies.
“We have this myth that there’s competition out there for quite a while. Now we have to start looking at the Competition Bureau itself as a myth.”
In a news release, Brian Nilsson, co-chief executive officer of XL said: “We are excited to have Lakeside as part of the XL organization and just as excited to repatriate the ownership of a large part of the Canadian beef packing business to Canadian ownership.”
At Tyson, Leland Tollett, interim president, said in a news release that Tyson intends to continue to buy Canadian cattle to supply its beef operations in the United States, such as the beef plant in Pasco.
