010551 IBP Chief Testifies in Tyson Case

Wilmington, DE - The chairman of IBP Inc. testified that Tyson Foods Inc. knew as much about accounting troubles at the meat packing giant's appetizer unit as IBP executives when the companies struck a $3.2 billion merger deal.

Robert L. Peterson, during testimony in Delaware Chancery Court, said he didn't learn that the Securities and Exchange Commission had questioned IBP's financial statements until days after the deal was reached Jan. 2.

Tyson was to pay $30 per share in cash and stock and assume $1.5 billion in IBP debt.

IBP is suing to try to force Tyson to complete its purchase of IBP as promised.

Tyson called off the deal in March, saying IBP failed to notify it of a federal accounting probe involving the meatpackers' canape and appetizer subsidiary, DFG Foods.

IBP claims Springdale, Ark.-based Tyson backed out because it got cold feet.

Peterson called it an “unconscionable act” that the SEC sent notice of its investigation to the lawyers for a special committee handling the merger and not to IBP's inside counsel or Peterson himself.

Lawyers for Dakota Dunes, S.D.-based IBP said they didn't receive the letter until Jan. 8, the deal's pricing was struck Jan. 2.

“I was livid about it. If I've got a problem and I don't know about it, I'm not a happy camper,” Peterson said.

The special committee was created by IBP's board and made up of outside directors. It didn't include Peterson because he was part of a leveraged buyout that included IBP management, according to IBP's lawyers.

Peterson also testified that he told Tyson executives at a Dec. 8 meeting that IBP was conducting an internal probe of DFG.

“We had a thief in the hen house,” Peterson said.

IBP's probe found that the unit had faked invoices, overstated inventories and listed non-collectible items as receivables.

DFG, a small canape, kosher foods and appetizer company, has $66 million in annual sales -- less than 1% of IBP's total sales.

“I was extremely upset at the situation; I was extremely embarrassed,” Peterson said.

He testified that he told Tyson executives that DFG was “a big black hole.”

“They knew; and if that bothered them, then don't sign. Say `Sorry I'm out of there,”' he said.

Peterson's testimony came in the middle of what is expected to be a weeklong trial.

Tyson is the world's top poultry producer, and IBP is the largest hog processor. A combination of Tyson and IBP would have created a company with 30% of the beef market, 33% of the chicken market and 18% of the pork market.

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