Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS—D.D.C.: Consent decree permitting Tyson/Hillshire tie-up approved, (Nov 24, 2014)

By Jeffrey May, J.D.

A consent decree resolving a challenge brought by the U.S. Department of Justice Antitrust Division and three states to the combination of Tyson Foods, Inc. and The Hillshire Brands Company has been approved by the federal district court in Washington, D.C. In order to proceed with the $8.55 billion acquisition, Tyson was required under the terms of the consent decree to divest its sow purchasing business—Heinold Hog Markets. The consent decree resolved the government's concern that Tyson would gain significant buyer power with respect to the purchase of sows from farmers as a result of the acquisition (U.S. v. Tyson Foods, Inc., November 20, 2014, Boasberg, J.).

On August 27, the U.S. Department of Justice, along with the attorneys general from Illinois, Iowa, and Missouri, filed a complaint, challenging the planned acquisition. At the same time, a proposed final judgment was filed with the court to settle the allegations by requiring the divestiture of Heinold Hog Markets.

Pending court approval of the proposed final judgment, Tyson was required to ensure that Tyson Hog Markets, Inc., a subsidiary of Tyson that included the divestiture assets, was operated as a competitively independent, economically viable and ongoing business concern. In light of the Hold Separate Stipulation and Order, the parties were permitted to proceed with the acquisition. The next day, they announced the completion of the merger.

Both Tyson, through its Heinold unit, and Hillshire purchased sows directly from farmers. Tyson, one of the world’s largest meat companies, produces, distributes, and markets chicken, beef, pork, and prepared food products. Tyson does not process sows; however, it buys and resells sows through Heinold. Heinold operates eight buying stations located in Illinois, Indiana, Iowa, Michigan, Minnesota, Missouri, and Nebraska. Hillshire is a manufacturer and marketer of brand name food products for the retail and foodservice markets, including sausage.

The government alleged that the proposed acquisition, without the divestiture, would have eliminated head-to-head competition between the companies and would have created a firm accounting for over a third of all sows purchased from farmers in the United States. Sows are female pigs that are raised for the purpose of breeding hogs. At the end of their productive breeding lives, sows are sold for slaughter. Packers, such as Hillshire, use the meat from sows in the production of pork sausage, according to the government.

The consent decree was approved by the court after no comments were filed in response to the settlement during the 60-day public comment period. Prior to the filing of the government's suit, U.S. Senator Chuck Grassley (R-Iowa) sent a letter to Assistant Attorney General William J. Baer, urging that the Antitrust Division thoroughly examine the proposed acquisition, particularly with regard to its effect on competition in the pork industry and the market for sows.

This is Case No. 1:14-cv-01474.

Attorneys: Angela L. Hughes for U.S. Department of Justice. Ronan P. Harty (Davis, Polk & Wardwell LLP) for Tyson Foods, Inc. Clifford H. Aronson (Skadden Arps Slate Meagher & Flom LLP) for Hillshire Brands Co.

Companies: Tyson Foods Inc.; Tyson Hog Markets Inc.; Hillshire Brands Co.

Cases: AcquisitionsMergers Antitrust AntitrustDivisionNews DistrictofColumbiaNews