NEW YORK (CNNfn) - Tyson Foods Inc. must go through with its $3.2 billion cash and stock acquisition of meatpacker IBP Inc., a Delaware Chancery Court ruled Friday.|
Vice Chancellor Leo E. Strine Jr. was not convinced of Tyson's claims it received misleading financial information from IBP and ruled Tyson improperly terminated its agreement, IBP said.
Tyson said it would be premature to comment until it has read the entire opinion.
Strine said in the ruling his only alternative would be to award damages to IBP, but such a figure would have been "very difficult and any award would be staggeringly large." In addition to paying $3.2 billion for IBP stock, Tyson must also assume $1.5 billion in debt.
IBP said Strine agreed with its position that "Tyson wished it has paid less especially in view of its own compromised 2001 performance and IBP's slow 2001 results."
"As we stated during the trial, it still makes strategic sense for these two great companies to team up," said IBP Chairman Robert L. Petersen, in a statement.
Tyson called off the $30-per-share proposed merger in late March, stating it relied on misleading information in determining to enter into a merger. IBP restated its financial statements at the request of the Securities and Exchange Commission.
Dakota Dunes, S.D.-based IBP (IBP: Research, Estimates) then sued to force Tyson to go though with the merger. IBP claimed Tyson was unjustified when its pulled its plans for the takeover, the company said in a suit filed in Delaware Chancery court. IBP says Tyson officials were routinely notified of potential charges at IBP unit DFG Foods, both before and after the merger agreement was signed.
Analyst John McMillin of Prudential Securities Inc. predicted the two companies would not end up merging and that Tyson would pay IBP to get out of the deal.
"I wouldn't look for a shotgun wedding. I'd look for a number that can settle the situation," McMillin said.
On Jan. 1, Springdale, Ark.-based Tyson, the largest U.S. chicken producer, won the bidding war against Smithfield Foods (SFD: Research, Estimates), the No. 1 U.S. pork processor, for IBP.
Terms of the merger agreement called for Tyson to pay $30 per share cash for 50.1 percent of IBP's outstanding shares and the equivalent of $30 per share in stock for the remaining stake. Tyson will also assume $1.5 billion in IBP debt, up slightly from its original projection of $1.4 billion.
Shares of Tyson (TSN: Research, Estimates) fell 5 cents to $11.38, and IBP fell 23 cents to $18.27 in regular trading.
In after-hours trading, shares of IBP jumped $3.23 to $21.50 while Tyson shares fell $1.38 to $10.
-- from staff and wire reports