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In re IBP S'Holders Litig. v. Tyson Foods

Court of Chancery of Delaware, New Castle

June 13, 2001, Submitted ; June 15, 2001, Decided

Consolidated Civil Action No. 18373

Opinion

 [*21]  STRINE, Vice Chancellor

This post-trial opinion addresses a demand for specific performance of a "Merger Agreement" by IBP, Inc., the nation's number one beef and number two pork distributor. By this action, IBP seeks to compel the "Merger" between itself and Tyson Foods, Inc., the nation's leading chicken distributor, in a transaction in which IBP stockholders will receive their choice of $ 30 a share in cash or Tyson stock, or a combination of the two.

The IBP-Tyson Merger Agreement resulted from a vigorous auction process that pitted Tyson against the nation's number one pork producer, Smithfield Foods. To say that Tyson was eager to win the auction  [*22]  is to slight its ardent desire to possess IBP. During the bidding process, Tyson was anxious to ensure that it would acquire IBP, and to make sure Smithfield did not. By succeeding, Tyson hoped to create the world's preeminent [**3]  meat products company - a company that would dominate the meat cases of supermarkets in the United States and eventually throughout the globe.

During the auction process, Tyson was given a great deal of information that suggested that IBP was heading into a trough in the beef business. Even more, Tyson was alerted to serious problems at an IBP subsidiary, DFG, which had been victimized by accounting fraud to the tune of over $ 30 million in charges to earnings and which was the active subject of an asset impairment study. Not only that, Tyson knew that IBP was projected to fall seriously short of the fiscal year 2000 earnings predicted in projections prepared by IBP's Chief Financial Officer in August, 2000.

By the end of the auction process, Tyson had come to have great doubts about IBP's ability to project its future earnings, the credibility of IBP's management, and thought that the important business unit in which DFG was located - Foodbrands - was broken.

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789 A.2d 14 *; 2001 Del. Ch. LEXIS 81 **

IN RE IBP, INC. SHAREHOLDERS LITIGATION. IBP, INC., Defendant and Cross-Claim Plaintiff, and Counterclaim Defendant, v. TYSON FOODS, INC. and LASSO ACQUISITION CORPORATION, Defendants, Cross-Claim Defendants and Counterclaim Plaintiffs.

Notice:  [**1]  [EDITOR'S NOTE: PART 1 OF 2. THIS DOCUMENT HAS BEEN SPLIT INTO MULTIPLE PARTS ON LEXIS TO ACCOMMODATE ITS LARGE SIZE. EACH PART CONTAINS THE SAME LEXIS CITE.]

Subsequent History: Date Corrected: June 18, 2001. Released for Publication December 19, 2001.

Disposition:  The court granted cross-plaintiff's claim for specific performance. It ordered the parties to collaborate and present a conforming partial final order.

CORE TERMS

Projections, merger agreement, Foods, earnings, meat, bid, restatement, Merger, special committee, due diligence, stock, beef, stockholders, fresh, negotiation, warranties, terminate, Documents, team, representations, Disclosure, estimate, charges, financial statement, advisors, auction, pork, per share, accounting, comments

Contracts Law, Remedies, Specific Performance, Business & Corporate Compliance, Contracts Law, Standards of Performance, Substantial Performance, Civil Procedure, Damages, Monetary Damages, Breach, Breach of Warranty, Defenses, Demurrers & Objections, Affirmative Defenses, General Overview, Burdens of Proof, Fraud & Misrepresentation