LITTLE ROCK — Springdale-based George’s Inc. has asked the federal court to expedite an antitrust lawsuit filed by the U.S. Department of Justice to block the company’s purchase of a Harrisonburg, Va., poultry-processing plant from Tyson Foods Inc.
The request, filed early last week was the latest filing in the suit initiated May 10 by the Department of Justice’s Antitrust Division in the U.S. District Court for the Western District of Virginia in Harrisonburg.
The lawsuit claims that the sale of the Harrisonburg plant eliminates substantial competition for poultry farmers in the Shenandoah Valley area to just two processors - George’s and Pilgrim’s Pride Corp. of Greeley, Colo.
After the sale, George’s would control 43 percent of the grower market in the area, the lawsuit stated.
The lawsuit asks that the sale be declared unlawful under antitrust laws and that appropriate relief be administered, including the possible divestiture of the Harrisonburg complex.
George’s Inc. and its business entities doing business in Virginia, George’s Foods LLC and George’s Family Farms LLC, are asking that the lawsuit be speeded up to avoid delaying the company’s plans to invest in the plant. Any slowdown of the timeline could adversely affect the 121 contract growers and 500 employees at the plant, George’s filing stated.
The George’s filing proposes a seven-week schedule for the lawsuit rather than the Justice Department’s suggested schedule that is “four times longer,” according to a news release from George’s.
Richard Lobb, the president of the National Chicken Council, said there are fewer than 40 companies of any size left in the highly competitive poultry industry.
“It is less concentrated than many other industries in the country today,” Lobb said. “It is far more diversified than the red-meat industry.”
George’s Inc. completed the purchase of a Tyson Foods Inc. complex in Harrisonburg on May 7. The terms of the deal were not disclosed at the time.
A memorandum filed with the court by George’s stated that declarations signed by about 90 percent of the broiler growers supplying the Virginia complex support the sale.
The memorandum stated that the supporting growers were concerned that, should the government’s suit set aside the sale, “there might not be another integrator that is able to take over the plant and run it at full capacity.”
Although details of the sale were not previously released, some were enumerated in a letter sent by George’s to Shenandoah Valley poultry growers.
The letter was in response to a story in the Northern Virginia Daily newspaper May 14 that a co-op of growers would have been interested in bidding on the plant if they had known it was for sale.
In that story, about a dozen growers said they would have jumped at a chance to buy the plant for the bargain price of $3.1 million that George’s paid for it.
The letter from George’s to growers stated that the company wanted to provide information on the sale to counteract incomplete or inaccurate information.
George’s paid about $3.1 million for the Harrisonburg complex, which included the plant, physical assets and equipment, the letter stated.
The company also paid $9 million more for the existing inventory of birds, feed, supplies and feed ingredients, and $700,000 more for trucks and trailers, the letter stated.
George’s will also make about $5.4 million in repairs and improvements to the plant to make it profitable, the letter stated, and has established customers for the plant’s product.
A co-op of growers would also have to buy the inventory, trucks and trailers, make improvements and establish a customer list for the products, along with establishing a support system for supplies, the letter stated.
George’s also has nearby facilities, management teams and technological infrastructure that can support the Harrisonburg complex that will “result in significant dollars of savings every year,” the letter stated. “A grower co-op would not have those same opportunities.”
Tyson Foods, also based in Springdale, had said that it sold the complex to George’s rather than close the unprofitable plant.
Gary George, chairman and chief executive officer of the privately held George’s, has stated that George’s is retaining most of the plant employees and has committed to honoring and extending the contracts with poultry farmers supplying the facility.
Tyson’s sale of the plant to George’s reduces the number of poultry processors in the area to just George’s and Pilgrim’s Pride Corp. and reduces competition for grower services, the Justice Department stated.
Tyson Foods is the largest chicken processor in the United States, with output of more than 205 million pounds of chicken per week.
George’s is the 15th-largest chicken processor in the U.S., with output of more than 20 million pounds of chicken per week.
Pilgrim’s Pride, based in Greeley, Colo., is the second-largest U.S. chicken processor, with output of more than 160 million pounds of chicken per week.
The transaction was announced March 18 but was not required to be announced under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 because it was for less than the minimum reporting threshold. The act requires companies to notify and provide information to the Department of Justice and the Federal Trade Commission before consummating certain-size acquisitions.
Business, Pages 65 on 05/22/2011