Tyson Foods Incorporated got the green light from the United States Antitrust when they approved the $8.5 billion sale of Hillshire Brands Company.
The Justice Department is requiring Tyson to sell its Heinold Hog Markets unit to earn the antitrust approval.
“Today’s proposed settlement will help ensure that hog breeders in the United States will continue to receive the benefits of vigorous competition when selling sows,” said Bill Baer, assistant attorney general for the Department of Justice’s antitrust division.
After share prices of both companies dropped sharply 10 minutes before the Justice Department announced the deal and there was a dramatic increase in stock and options volume, it appeared traders were bracing for bad news.
The Hillshire share trading volume hit 8.07 million shares. Of the total trading volume, 5.5 million shares came several minutes before and after the DOJ’s announcement.
With operations in Illinois, Iowa, Indiana, Michigan, Minnesota and Nebraska, and $270 million in revenue, Heinold Hog Markets buys sows from farmers and resells them to manufacturers. Hillshire buys them to make sausages for its Jimmy Dean and Hillshire Farm brands.
Arkansas-based Tyson, a massive seller of chicken, beef and pork competes with Hillshire in the business of buying sows when they are too old to breed, according to the Justice Department.
“Although the sale of sows constitutes a small percentage of overall revenues, farmers rely on this source of income as an important contribution to their earnings,” the Justice Department said in a competitive impact statement filed with the U.S. District Court for the District of Columbia.
Creating a lot of unrest amongst farmer, consumer and rural organizations, as well as lawmakers, they worried the deal would allow the larger Tyson to have enough power to push down the prices paid to hog farmers, thus driving up prices at the grocery store level.
According to Wenonah Hunter, executive director of Food and Water Watch, “Because Tyson can align its pork slaughter business with Hillshire’s branded processing business, Hillshire products will have a leg up on competitors, who will likely have to raise prices.”
The court must approve the proposed settlement filed by the Justice Department to help prevent future price inflation.