Tags: Tyson Foods | Pilgrims Pride | Hillshire | Consumers

If Tyson Wins Bid for Hillshire, Many Consumers Could Lose

By    |   Wednesday, 11 June 2014 01:14 PM

If Tyson Foods wins its current bid to acquire Hillshire Brands, some are concerned consumers and other industry players will be among the losers.

Tyson Foods has emerged on top of a bidding war for Hillshire Brands. Having outbid Pilgrim's Pride, Tyson looks set to pay upwards of $8 billion for the acquisition. But Pilgrim's Pride may not be the only loser.

If the deal is sealed it will be good for Tyson and its shareholders, says Louis Biscotti, partner and national director for the food and beverage sector at accounting firm WeiserMazars LLP. But consumers are likely to get the short end of the stick, he told International Business Times.

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“Prices will increase because if you’re paying a huge premium to buy a company, it will have to result in increased selling prices to consumers down the road because you need to recoup that investment,” Biscotti said.

“While they’re touting synergies of hundreds of millions of dollars, that doesn’t make up the billions that they’re investing in the acquisition,” he added.

In theory, consumers could benefit from those synergies, says Chad Hart, associate professor of economics at Iowa State University.

The acquisition could allow Tyson to streamline operations and lower costs, he told USA Today. Whether Tyson would pass along the savings to consumers is another question. But generally, that's not how it goes. Fewer players usually does mean higher prices, he said.

“It is something the government will be watching to see if there is enough competition in the market to allow these mergers to go through,” Hart added.

Tyson's bid for Hillshire follows other big food industry deals, such as last year's deal where a Chinese company bought Smithfield Foods.

Senator Chuck Grassley, a member of both the Senate Agriculture and Judiciary committees, expressed concern to USA Today about the impact another major deal will have not only on consumer prices but also on independent producers.

“Meat processing is already highly concentrated, and the companies trying to acquire Hillshire are two of the largest processors,” Grassley said. “If an acquisition becomes final, the Justice Department ought to scrutinize the details on behalf of both consumers and family farmers with the goal of a competitive marketplace.”

Deals such as the one currently on the table are a risk to farmers and ranchers who supply corn, hogs and other commodities to major meat processors or food producers, Don Roose, president of U.S. Commodities, told USA Today.

“If you have fewer choices to sell to it means you don't have as much competition and competition is something that usually helps” get a better price, Roose said.

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If Tyson Foods wins its current bid to acquire Hillshire Brands, some are concerned consumers and other industry players will be among the losers.
Tyson Foods, Pilgrims Pride, Hillshire, Consumers
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2014-14-11
Wednesday, 11 June 2014 01:14 PM
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