Sues Smithfield Foods to Block
Iowa Attorney General Tom Miller filed suit today to block Smithfield Foods Inc. - the world's largest pork processor -- from acquiring the Iowa pork-production assets of Murphy Farms Inc.
"We allege the acquisition would violate Iowa's Corporate Farming law, which prohibits any pork or beef processor from owning, controlling, or operating a feedlot in Iowa," Miller said. The suit was filed Monday afternoon in Humboldt County District Court in Dakota City.
"Our argument is straightforward," Miller said. "Processors may not control hog production facilities in Iowa, and Smithfield is a processor. In fact, Smithfield is the largest pork processor in the world." The suit said Smithfield reported sales of $3.8 billion last year.
"If Smithfield acquires Murphy Farms, it will retain essential control of pork production at about 300 sites in Iowa where Iowa producers have swine production contracts with Murphy Farms," Miller said. "Those contracts specify today that Murphy Farms has authority over most important management decisions, from ownership, source and marketing of the hogs, to the hogs' sex, feed ration, medication, and transportation."
"We allege that adds up to control -- and a violation if Smithfield acquires Murphy's assets in Iowa," Miller said. "That is important because Iowa's Corporate Farming law was enacted in order to preserve free and private enterprise, prevent monopoly, and protect consumers."
On Sept. 2, 1999, Smithfield Foods, of Smithfield, VA, announced that it had reached agreement in principle to acquire Murphy Farms, Inc., which is headquartered in Rose Hill, NC. The acquisition is scheduled to be completed as early as Tuesday, January 25, 2000.
On Sept. 3, the suit said, Miller's office contacted Smithfield, "expressly made them aware of the prohibitions" of Iowa's Corporate Farming law, and asked Smithfield to explain how it planned to address the issue.
Miller's suit asked the court to issue preliminary and permanent injunctions prohibiting Smithfield Foods from acquiring Murphy Farms or any assets in Iowa that would violate the Iowa Corporate Farming act.
When Smithfield announced the planned Murphy Farms acquisition on Sept. 2, it noted that Smithfield Foods "is the largest hog producer and pork processor in the world." It said the company's brands include Smithfield Lean Generation Pork, Smithfield Premium, Gwaltney, John Morrell, Patrick Cudahy, Schneiders, Krakus, Lykes, Esskay, Kretschmar, Valleydale, Jamestown, Dinner Bell, ReaLean, Patrick's Pride, Great, Tobin's First Prize, Peyton's, Curly's, Ember Farms, and others.
Smithfield also noted in September that Murphy Farms is the second largest hog production company in the U.S., with approximately 325,000 sows producing approximately 5.5 million market hogs annually. Smithfield said acquisition of Murphy Farms would roughly double Smithfield's own hog production capacity. Smithfield said the acquisition would increase the company's level of domestic vertical integration to 60 percent (the company would produce 60% of the pigs it requires for processing.) Smithfield said it and its subsidiaries raise hogs already in North Carolina, South Carolina, Colorado, Virginia, Utah, Brazil and Mexico.
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