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Filed by Smithfield Foods, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: IBP, Inc.
Commission File No. 1-6085
November 13, 2000
FOR IMMEDIATE RELEASE
SMITHFIELD FOODS OFFERS TO ACQUIRE IBP IN STOCK-FOR-STOCK
TRANSACTION VALUED AT $25 PER SHARE
-- STRATEGIC COMBINATION OFFERS ALL IBP SHAREHOLDERS SUPERIOR VALUE
AND CONTINUING EQUITY PARTICIPATION --
-- TRANSACTION WOULD BE ACCRETIVE IN FIRST YEAR; COMBINED COMPANY WOULD
HAVE STRONG BALANCE SHEET --
SMITHFIELD, VIRGINIA, NOVEMBER 13, 2000 - Smithfield Foods, Inc. (NYSE: SFD)
announced today that it has offered to acquire all of the outstanding shares of
IBP, Inc. (NYSE: IBP) through a tax-free merger in which IBP shareholders would
receive $25 per share payable in Smithfield Foods common stock at an exchange
ratio based on the average price of Smithfield Foods shares for a period prior
to the closing. The proposed transaction would have a total transaction value of
approximately $4.1 billion, including the assumption of $1.4 billion of IBP
debt.
This represents a 19.8% premium over the closing price of IBP common stock on
Friday, November 10th, and a 36.5% premium over the closing price of IBP stock
on September 29, 2000, the day prior to the company's announcement that it had
agreed to a highly-leveraged management buyout from a group comprised of
affiliates of Donaldson Lufkin & Jenrette, certain members of IBP senior
management, Archer Daniels Midland Company and Booth Creek Partners. The buyout
transaction would cash out all IBP stockholders except the buyout group at a
price of $22.25 per share. Smithfield Foods' offer represents a 12.4% premium
over the management buyout group's offer price.
The number of Smithfield Foods shares to be exchanged for IBP shares will be
subject to a 10 percent collar, both upward and downward, based upon the $31.63
closing price of Smithfield common stock on November 10, 2000. The proposal
provides for a maximum exchange ratio of 0.878 if the pre-closing average
trading price of Smithfield Foods stock, for a period prior to the closing, is
below $28.46 and a minimum exchange ratio of 0.719 if the pre-closing average
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trading price, for a period prior to the closing, is above $34.79. The exchange
ratio based upon Friday's closing price was 0.791.
Smithfield Foods' proposed transaction would provide superior economic value to
all IBP shareholders and continued participation in the combined company's
future potential. Smithfield Foods' proposed transaction would be tax-free to
IBP shareholders and accounted for as a pooling of interests. Unlike the
leveraged buyout transaction, the Smithfield Foods transaction is not subject to
a financing condition.
Smithfield Foods said it is confident there are no meaningful impediments to its
offer from an antitrust or other regulatory point of view. The company has
conducted a thorough analysis of the regulatory approvals that would be required
to consummate the transaction, and has developed a plan that it believes will
address issues that might be raised regarding concentration in certain areas of
the two companies' respective businesses. This plan may include the divestiture
of certain assets.
Smithfield Foods said it estimates, based on publicly available information,
that the combined company would achieve economic synergies of approximately $200
million per year after the companies have been integrated. The company added
that it does not anticipate a significant reduction of employment levels. After
giving effect to those synergies and based on analyst estimates, Smithfield
Foods expects that the proposed transaction would be accretive to earnings in
the first year.
Smithfield Foods made its offer in a letter sent to the Chairperson of the
Special Committee of IBP's Board of Directors that approved the proposed
leveraged buyout by the company's senior management and a group of selected
insiders.
In his letter to the Special Committee, Smithfield Foods Chairman and Chief
Executive Officer Joseph W. Luter, III, said, "Our management team is very
focused on stockholder value creation and has delivered superior long-term
returns to our stockholders through our ability to manage our operations
efficiently and to successfully integrate value added acquisitions... We view a
combination with IBP as an opportunity to create significant value for both of
our stockholder bases by continuing to expand the movement into case-ready
products, by creating a national brand and by building a strong stable of
value-added meat products. As a stock-for-stock transaction, our proposal would
permit our combined management team to grow the combined business to create
greater value free of the added debt burdens that IBP would labor under in a
highly leveraged transaction such as the proposed management buyout."
In commenting on the offer, Mr. Luter added, "By adding beef to our product
portfolio, this combination will enable Smithfield Foods to better serve the
increasingly demanding needs of the nation's leading food retailers and to
satisfy consumers' growing appetite for value-added, branded meat products. As a
national business with greater scale, our new entity will be able to work more
efficiently and effectively with our customers, providing a centralized
purchasing process, better service and more uniformity and consistency among our
products."
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"For farming communities, the combined company would have far greater financial
resources and staying power than they can expect from a debt-laden company
controlled by financial investors with little long-term commitment to our
industry, particularly in the event of an economic downturn or market
volatility. Smithfield Foods has a long and proud history of working in
productive partnership with independent farmers. We are committed to building on
that record to the benefit of all concerned."
Mr. Luter concluded, "Many of IBP's shareholders have called into question the
fairness of the buyout group's proposal. We sincerely hope and believe the
Special Committee will, consistent with its fiduciary duty, review our proposal
on the merits and, based on those merits, will promptly conclude that the best
interests of their shareholders, and indeed, all concerned, are best served by
commencing discussions with us towards the execution of a mutually acceptable
merger agreement."
Smithfield Foods has a proven track record of creating shareholder value and
successfully closing and integrating acquisitions. Since 1990, the company has
completed 11 acquisitions, all of which have been successfully integrated into
the company's strategy and operations. The company was ranked the number one
FORTUNE 500 food stock in total return to investors, and placed in the top 15th
percentile in total return to investors among all FORTUNE 500 companies, over
the past 10 years.
The complete text of the letter sent to the Chairperson of IBP's Special
Committee follows:
November 12, 2000
Special Committee of the Board of Directors of IBP, Inc.
IBP, Inc.
800 Stevens Port Drive
Dakota Dunes, South Dakota 57049
Attn: Ms. JoAnn R. Smith, Chairperson:
As you know, we have great respect for IBP, which led us last August to increase
our investment in the Company to approximately 6.6%. As you can imagine, we were
both surprised and disappointed to learn of the proposed leveraged buyout of
IBP, led by the Company's management, DLJ and certain other large stockholders,
which provides for a cash out of all your stockholders other than the buyout
group at a price of $22.25 per share.
Since the announcement of the management buyout, we have spent a great deal of
time considering and analyzing the proposed buyout transaction and its
implications for our investment in the Company. We are aware of the adverse
reaction in the marketplace to the proposed management buyout. In particular, we
have noted the reaction of Brandes Investment Partners, Inc., the largest
stockholder of the Company that is not part of the buyout group, which recently
stated in a public filing, among other things, that it intends to vote against
the transaction and might consider exercising appraisal rights under Delaware
law. As the second
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largest stockholder of the Company that is not part of the buyout group, we also
have concerns with respect to the management buyout and the valuation of the
Company it represents.
After due consideration and review, we have concluded that we can offer a
superior transaction, and that there is a compelling logic to a combination of
our two companies in a manner that provides greater short and long term value to
IBP and benefits both of our companies and all of our respective stockholders.
Accordingly, the board of directors of Smithfield has authorized me to advise
you of our offer to acquire all of the outstanding shares of IBP common stock in
a merger in which your stockholders would receive a price of $25 per share,
payable in Smithfield common stock at an exchange ratio based on the average
trading price of Smithfield's shares for a period prior to the closing, subject
to a maximum exchange ratio of 0.878 Smithfield shares (corresponding to a
$28.46 or lower average Smithfield trading price) and a minimum exchange ratio
of 0.719 Smithfield shares (corresponding to a $34.79 or higher average
Smithfield trading price) per IBP share. Our proposal provides a 19.8% premium
over last Friday's closing price of IBP common stock, a 12.4% premium over the
price offered in the management buyout and a 36.5% premium over the closing
price of IBP on September 29, 2000, the last trading day prior to the public
announcement of the management buyout. Our proposed transaction would also be
tax-free for your stockholders and would be accounted for as a pooling of
interests, which would have significant accounting benefits for the combined
company. We would anticipate that IBP's employee stock options would be
converted into Smithfield stock options on a basis consistent with the exchange
ratio in the merger.
Our companies have had a long-standing relationship and have many complementary
businesses, factors that we believe will allow the combined company to thrive
and grow in the years to come for the benefit of all of our stockholders and
other constituencies including producers, customers and consumers. Unlike the
proposed management buyout, which provides a continuing equity interest only for
management and certain large insider stockholders of the Company (to the
exclusion of well more than three-quarters of IBP's stockholders), our proposal
both delivers more value to your stockholders and gives all of your stockholders
the opportunity to continue to share in the future appreciation of our combined
companies, thus providing a level playing field to all your stockholders without
unfairly favoring a few. In addition, based on publicly available information,
we estimate that a combination of our two companies would result in synergies of
approximately $200 million per year after our respective businesses have been
integrated, which in our proposal would be shared by all of IBP's and
Smithfield's stockholders. After giving effect to such synergies, and based on
public analyst estimates, we would expect that our proposed transaction would be
accretive to earnings in the first year.
In furtherance of the value of the combination, we recognize that great
companies are built on a foundation of great management teams. We would be
pleased to have Robert Peterson and Richard Bond serve on our management
committee after the merger and, given our high regard for your operating
management, we would envision integrating IBP's and Smithfield's management
teams in a manner that would create the strongest possible combined company.
Based on the information available to us, we do not anticipate any significant
reduction in employment levels. We would also like to discuss with you the
possibility of offering some of
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IBP's outside directors who may be interested the opportunity to join our board
of directors after the merger.
We have reviewed the management buyout merger agreement and it is evident that
our offer constitutes a "Superior Proposal", as defined in such agreement, which
would permit you to terminate the merger agreement in a manner consistent with
its terms. As indicated above, our offer represents a 12.4% premium to the
amount of consideration offered in the management buyout, totaling approximately
$290 million of additional aggregate consideration.
Unlike the buyout transaction, our offer is not subject to a financing
condition. Of course our offer is subject to negotiation and execution of a
mutually acceptable agreement containing customary terms, the receipt of
required regulatory and stockholder approvals, our ability to utilize pooling of
interest accounting and completion of a brief confirmatory due diligence review,
including as to the recent restatement of your financial results and any ongoing
implications of such restatement.
We are confident in light of the fact that the Company has already entered into
a merger agreement that we will be able to enter into a mutually satisfactory
agreement expeditiously. We anticipate that there will be no issue with respect
to our stockholders' approval. As to regulatory matters, we have done a thorough
analysis of the regulatory approvals that would be required to consummate the
transaction, and we are confident that there are no meaningful impediments to
our offer from an antitrust or other regulatory point of view. In addition, to
the extent issues might be raised regarding concentration in certain areas of
our respective businesses, we have developed a plan to address such issues which
may include the divestiture of certain assets, and are prepared to discuss with
you and your advisors the steps that we believe will resolve any issues that
might be raised by regulators. Based on publicly available information, we and
our advisors believe that there should be no impediments to using pooling of
interest accounting and we would expect that you would not take any actions to
prevent us from accounting for the transaction in such a manner.
Since the merger agreement with respect to the management buyout does not
require you even to conclude in advance that our offer is in fact a Superior
Proposal in order to commence discussions and share information with us, but
only determine that our offer "is reasonably likely to result" in a Superior
Proposal, we would like to commence discussions with you as soon as possible. We
are prepared to discuss all aspects of our offer with you, particularly if the
results of our due diligence allow us to identify additional value or synergies
in the Company, consistent however with our policy of only participating in
transactions that we believe enhance value for our stockholders and are
accretive to earnings in the near term.
We urge you to recognize the immediate and long-term superior value of this
transaction to all of your stockholders. As you may know, our management team is
very focused on stockholder value creation and has delivered superior long-term
returns to our stockholders through our ability to manage our operations
efficiently and successfully to integrate value added acquisitions, which we are
confident we could do with IBP. We view a combination with IBP as an opportunity
to create significant value for both of our stockholder bases by continuing to
expand the movement into case ready products, by creating a national brand and
by
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implementing best of breed operating procedures. As a stock-for-stock
transaction, our proposal would permit our combined management team to grow the
combined business to create greater value free of the added debt burdens that
IBP would labor under in a highly leveraged transaction such as the proposed
management buyout.
Because of the importance of this proposal to our respective stockholders and in
light of our obligations under the securities laws, we are compelled to release
this letter publicly and will accordingly do so.
We look forward to meeting with you and your advisors as soon as possible so
that we can further discuss our offer and promptly enter into a definitive
agreement with respect to a transaction that benefits both of our companies and
all of our respective stockholders and constituencies.
Sincerely,
Joseph W. Luter, III
Chairman
Smithfield Foods, Inc.
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Smithfield Foods' financial advisor on the transaction is Goldman, Sachs & Co.;
Simpson Thacher & Bartlett, McGuire Woods, and Hunton & Williams are providing
legal counsel.
Investment Community Conference Call
Smithfield Foods will conduct a conference call at 8:30 a.m. ET today to discuss
its proposal. The call can be accessed at www.vcall.com (enter ticker: SFD).
ABOUT SMITHFIELD FOODS, INC.
With annual sales of $5.2 billion, Smithfield Foods is the leading producer and
marketer of fresh pork and processed meats in the United States. For more
information, please visit www.smithfieldfoods.com.
ABOUT IBP, INC.
Headquartered in Dakota Dunes, South Dakota, IBP has more than 60 production
sites in North America, joint venture operations in China, Ireland and Russia
and sales offices throughout the world. The company, which generated sales of
$14.1 billion in 1999, employs 49,000 people. IBP has four business segments:
the IBP Fresh Meats Company, Foodbrands America, Inc., the Consumer Branded
Products Group and the IBP International Sales Company.
CONTACTS:
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FOR INVESTORS: FOR MEDIA:
Jerry Hostetter Josh Pekarsky
Smithfield Foods, Inc. Sarah Zitter-Milstein
(212) 758-2100 Kekst and Company
(212) 521-4800
THIS NEWS RELEASE MAY CONTAIN "FORWARD-LOOKING" INFORMATION WITHIN THE MEANING
OF THE FEDERAL SECURITIES LAWS. THE FORWARD-LOOKING INFORMATION MAY INCLUDE
STATEMENTS CONCERNING SMITHFIELD'S OR IBP'S OUTLOOK FOR THE FUTURE, THE ABILITY
TO REALIZE ESTIMATED SYNERGIES, AS WELL AS OTHER STATEMENTS OF BELIEFS, FUTURE
PLANS AND STRATEGIES OR ANTICIPATED EVENTS, AND SIMILAR EXPRESSIONS CONCERNING
MATTERS THAT ARE NOT HISTORICAL FACTS. FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE EXPRESSED IN, OR IMPLIED BY, THE STATEMENTS. THE FOLLOWING FACTORS,
AMONG OTHERS, COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN, OR IMPLIED BY, THE STATEMENTS: THE RISKS THAT SMITHFIELD'S AND
IBP'S BUSINESSES WILL NOT BE INTEGRATED SUCCESSFULLY, THE RISK THAT SMITHFIELD
AND IBP WILL NOT REALIZE ESTIMATED SYNERGIES, COSTS RELATING TO THE PROPOSED
TRANSACTION, THE AVAILABILITY AND PRICES OF LIVE HOGS, LIVE CATTLE, RAW
MATERIALS AND SUPPLIES, PRODUCT PRICING, THE COMPETITIVE ENVIRONMENT AND RELATED
MARKET CONDITIONS, OPERATING EFFICIENCIES, ACCESS TO CAPITAL, ACTIONS OF
DOMESTIC AND FOREIGN GOVERNMENTS AND OTHER FACTORS DISCUSSED IN SMITHFIELD'S AND
IBP'S RESPECTIVE FILINGS WITH THE SEC.
More detailed information pertaining to Smithfield's proposal will be set forth
in appropriate filings to be made with the SEC. We urge stockholders to read any
relevant documents that may be filed with the SEC because they will contain
important information. Stockholders will be able to obtain a free copy of any
filings containing information about Smithfield and IBP, without charge, at the
SEC's Internet site (http://www.sec.gov). Copies of any filings containing
information about Smithfield can also be obtained, without charge, by directing
a request to Smithfield Foods, Inc., 200 Commerce Street, Smithfield, Virginia
23430, Attention: Office of the Corporate Secretary (757-365-3000).
This communication shall not constitute an offer to sell or the solicitation of
an offer to buy securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of such jurisdiction.
Smithfield and certain other persons named below may be deemed to be
participants in the solicitation of proxies. The participants in this
solicitation may include the directors and executive officers of Smithfield. A
detailed list of the names of Smithfield's directors and officers is contained
in Smithfield's proxy statement for its 2000 annual meeting, which may be
obtained without charge at the SEC's Internet site (http://www.sec.gov).
As of the date of this communication, none of the foregoing participants, other
than Smithfield (which beneficially owns approximately 6.6% of IBP's common
stock), individually beneficially owns in excess of 5% of IBP's common stock.
Except as disclosed above and in Smithfield's proxy statement for its 2000
annual meeting and other documents filed with the SEC including Smithfield's
Schedule 13D relating to the IBP common stock, to the knowledge of Smithfield,
none of the directors or executive officers of Smithfield has any material
interest, direct or indirect, by security holdings or otherwise, in Smithfield
or IBP.
