A lawsuit stemming from Tyson Foods Inc's $2.16 billion acquisition of certain assets of Keystone Foods from Brazilian company Marfrig will be handled in arbitration, a New York federal judge ruled this week.
Keystone, now known as Beef Holdings, sued Tyson in April 2019 (the transaction closed in November 2018) claiming Tyson lowered the sale price from $2.5 billion, calling it a "breach of contract."
The companies attempted to resolve the dispute in arbitration, but Beef Holdings objected to nine of Tyson's adjustments, refused to participate in arbitration and filed a complaint with the Supreme Court of New York that Spring. The case was then moved to federal court in New York.
U.S. District Judge Andrew Carter on Wednesday ordered a stay of litigation pending arbitration for all remaining claims against Tyson, except one claim alleging breach of contract.
Of the 10 claims by Beef Holdings, Carter dismissed four and referred five to arbitration by accounting firm KPMG. He requested a status report from the companies by April 21, 2021.
"We're pleased with the court's ruling," Tyson spokesman Gary Mickelson said in an email Friday. "We believe that when the parties involved agree to an alternative dispute resolution, they should be held to that agreed process."
Tyson countersued in October 2019, claiming Beef Holdings made a series of financial maneuvers to inflate the price of Keystone and steal millions from the business. This included $500,000 in missing works of art and collectibles that belonged to Tyson, according to its complaint.
"Arbitration advances important dual goals of providing thorough and cost efficient resolution processes and alleviates the strain on our courts," Mickelson said.
A string of events in the summer of 2018 led to the hundreds of millions of dollars in dispute. When Marfrig, one of the largest beef processors, signaled it wanted to sell Keystone, a number of bidders expressed interest, among them Tyson. Court records show Tyson sent a letter dated July 20, 2018, saying it was prepared to acquire all of Keystone's assets for a total of $2.5 billion "with no further deductions."
After both companies agreed to hammer out the final details, records show Tyson demanded a $330 million discount based on the original purchase price of $2.7 billion just before the signing date. With no other bidders and concerns of how shareholders would react to backing out of the deal, Marfrig agreed to move forward with a revised purchase price of $2.37 billion on August 17, 2018.
According to Keystone's complaint, Tyson also exploited an accounting mechanism to shave an additional $232 million from the revised price, resulting in the final $2.16 billion sale.