Senator wants Smithfield deal review

20-09-2006 | |

US senator Tom Harkin (Democrat, Iowa) called upon the country’s department of Justice to thoroughly review Smithfield Foods’ plans to merge with Premium Standard Farms (PSF).

Harkin said that the department should check what impact the merger would have on pork producers, consumers and hog and pork markets and whether or not the merger would violate anti-trust laws.
“The merger agreement involves a very substantial change in the structure, vertical integration and degree of consolidation in the US pork industry,” said Harkin, who is ranking Democrat on the Senate Agriculture, Nutrition and Forestry Committee. “It obviously will have significant impacts on both independent hog producers and those who raise hogs under contract.”
Smithfield is US’s largest pig producing and processing company. Premium Standard Farms is the nation’s second-largest pig producer and sixth-largest processor. This merger would give Smithfield control of 20% of US pig production and 31% of pork processing. Economists stated that when four firms control over 40% of a sector, in this case pig slaughter, market competitiveness will decline.
A JP Morgan Chase research associate, however, predicted that anti-trust issues were not to be expected. The associate, Akshay Jagdale, said Smithfield’s growth potential as a result of the merger is minimal, but the company would profit from several strategic advantages.