Tyson To Buy Hudson $642 Million Deal Unrelated To Recent Tainted Meat Crisis, Hudson Says
Tyson Foods, the nation’s largest poultry producer, is buying Hudson Foods for $642 million just weeks after Hudson recalled a record 25 million pounds of hamburger in a contamination scare.
“They have made us a very good offer, and the Hudson Foods board and I have decided that it is in the best interest of our shareholders, associates, growers and customers to accept,” Hudson Chairman James “Red” Hudson said Thursday.
Hudson said an E. coli scare that prompted last month’s coast-to-coast frozen hamburger recall had little to do with the decision to sell. He acknowledged the bad publicity, however, at a news conference discussing the deal.
“We didn’t think we couldn’t make a go of it,” Hudson said. “We just thought that together we could go forward with a major company that would give a lot of people an opportunity to grow and perform and better their own lives.”
The deal, subject to approval by regulators and Hudson stockholders, comes a week after Hudson said it expected its quarterly earnings to be down by at least 30 percent because of the E. coli scare, which cost Hudson its biggest customer, Burger King.
Hudson recalled the meat under government pressure after ground beef processed at its plant in Columbus, Neb., was found to be tainted with the deadly bacteria. It was the biggest meat recall in U.S. history.
U.S. Department of Agriculture officials have said the contamination is believed to have come from slaughterhouses that supplied the plant. Hudson said last week it will sell the plant to IBP Inc. of Dakota City, Neb., and officials for IBP said Thursday the sale would be unaffected by the Tyson acquisition.
Hudson said Tyson founder Don Tyson initially approached him about an acquisition a dozen years ago and current Tyson Chairman Leland Tollett said his company had watched Hudson grow in the business.
“We’ve been neighbors and friends with Hudson people for a long, long time,” Tollett said. “It did not hurt the deal that the CEOs live across the street from each other.”
Their headquarters are in neighboring towns in northwestern Arkansas - Tyson in Springdale and Hudson 10 miles north in Rogers, where the CEOs live.
James Hudson founded his poultry-based company in 1972.
“They probably shouldn’t have gotten into the ground beef business,” said Shane Glenn, an analyst with Stephens Inc. in Little Rock. “It’s not where their core experience is.”
He expected that Tyson and Hudson would be able to merge their food operations easily.
Tyson is politically connected and has close ties to President Clinton. The company has been under scrutiny in the investigation of former Agriculture Secretary Mike Espy. Espy resigned after accepting tickets to sporting events and other favors from Tyson, a company his agency regulated. Espy was indicted on federal charges last week. Tyson has denied any wrongdoing.
In Thursday’s announcement, Tyson said it had agreed to exchange $8.40 in cash and six-tenths of a share of its stock for each of Hudson’s 30.25 million shares.
The news boosted Hudson shares $3.93-3/4, or 23 percent, to $21.12-1/2 on the New York Stock Exchange. Tyson shares rose $2.12-1/2, or 10 percent, to $23.50 on the Nasdaq Stock Market.