REGULATORS have filed a lawsuit to block the world's largest beef packer from buying the fourth-largest United States beef processor, saying such a deal could push up costs for consumers and drive down prices paid to ranchers.
The Department of Justice and attorneys-general for 13 states filed the suit against Brazilian beef producer JBS SA and National Beef Packing Co of Kansas City, Missouri.
In March, JBS had said it would acquire National Beef in a US$560-million stock-and-cash deal, which would make it the largest US beef processor. It also announced a deal to buy Smithfield Beef Group Inc, the nation's fifth-largest beef producer, for US$565 million.
The Department of Justice said it is not challenging that deal, only the deal with the larger player, which would combine two of the top four US beef packers.
Grocers, food service companies and ultimately, consumers will likely have to pay higher prices for beef if JBS's buyout of National Beef were to go through, according to filings in the US District Court in Illinois.
The suit said the deal would put more than 80 percent of domestic cattle-packing capacity in the hands of three companies - JBS, Tyson Foods Inc and Cargill Inc. Regulators estimate that if JBS were allowed to buy National, it would have annual sales of more than US$14 billion and the ability to slaughter more than one-third of US cattle-packing capacity, at about 40,000 head of cattle a day.
The combination would not only lead to higher retail prices for US consumers but also lower wholesale prices for cattle producers, ranchers and feedlots, the suit said.
Battle plans
JBS became the third-largest beef processor in the US last year after purchasing Colorado-based Swift & Co for US$225 million.
National Beef was disappointed by the lawsuit and plans to "vigorously contest" the attempt to block the deal, said Steve Hunt, chief executive of US Premium Beef LLC, which is the majority owner of National Beef. USPB's producer members approved the transaction in March.
National Beef Chief Executive John R. Miller said the deal would help customers and producers by helping them save on costs.
JBS said late on Monday it planned to immediately complete the buyout of Smithfield Beef and that it, like National Beef, would "vigorously defend" the lawsuit.
"We believe the government's case is misplaced and we look forward to defending this matter in court," said Wesley Batista, president and chief executive of JBS' North American operations. He also said the deal was competitive and would create savings.