Place Your Ad Here

[counter]

000205 Iowa Steps Up Smithfield/Murphy Challenge

February 6, 2000

Chicago - Iowa's attorney general filed a fresh legal challenge to block Smithfield Foods Inc.'s takeover of Murphy Farms Inc., accusing the two of selling Murphy's Iowa operations to a “sham” company to skirt a legal challenge to the acquisition.

“Today we are alleging that transactions purporting to transfer Murphy's Iowa hog production assets to a third party are a sham designed for the sole purpose of creating an appearance of compliance by Smithfield with Iowa's corporate farming statute,” Iowa Attorney General Tom Miller said in a statement.

Murphy last week sold its Iowa hog assets to a former employee so that Smithfield could complete its purchase of the No. 2 hog producer and avoid legal battles, Smithfield said earlier this week.

An Iowa judge had previously scheduled a Feb. 10 hearing and issued a temporary injunction halting the close of the sale after the state challenged the acquisition.

Miller said the state believes the structure of the Iowa assets sale allows Smithfield to maintain control of the Iowa operations in violation of the state's law banning corporate farming.

Michael Miller, Smithfield's director of investor relations, said the company had not seen Iowa's amended legal challenge.

“We don't agree that its a sham transaction. Our attorneys need to see the latest filing before we can really comment further,” Michael Miller said.

Iowa's corporate farming law was enacted in 1977 and bans pork and beef processors from owning, controlling or operating feedlots in the state, said Bob Brammer, spokesman for the Iowa attorney general's office.

The original suit, filed Jan. 24, argued that if Smithfield acquired Murphy Farms assets in Iowa, Smithfield would retain essential control of pork production at about 300 sites in Iowa where Iowa producers have swine production contracts with Murphy Farms.

The attorney general's farm division estimates conservatively that Murphy has at least 900,000 pigs and hogs in Iowa.

The amended petition says Stoecker Farms Inc. bought the Iowa assets of Murphy Farms with a loan of about $80 million from Murphy.

Stoecker Farms' sole known officer and shareholder is Randall Stoecker of Ames, Iowa, the petition said.

The only payment made by Stoecker were two promissory notes which defer repayment of most of the debt for at least 10 years, the attorney general said.

The attorney general said that Murphy transferred all its remaining Iowa assets to Smithfield, including the financial documents of Murphy's loan to Stoecker, “thereby putting Smithfield in total and complete control of Stoecker's finances and without any further or additional infusion of capital or other collateral.”

The attorney general asked the court to require Stoecker Farms to “disgorge all its holdings” and “prohibit Smithfield Foods Inc. from directly or indirectly participating in any manner with the operation or control of Iowa feedlots.”

On Jan. 21, Smithfield was forced to divest all Missouri property within 10 days of acquiring Murphy Farms, including 16 farms and 82,000 hogs, according to a news release posted on that state's web site.

Missouri attorney general Jeremiah Nixon had filed a lawsuit in early January to stop the acquisition, which he said would violate state laws prohibiting corporate farming.

RETURN TO HOME PAGE

Meat Industry INSIGHTS Newsletter
Meat News Service, Box 553, Northport, NY 11768

E-mail: sflanagan@sprintmail.com