One of IBP’s top executives testified Monday that Tyson Foods knew in advance of financial troubles at an IBP subsidiary that the poultry giant later cited as a reason for calling off its $3.2 billion purchase of the company.

The statements by Richard L. Bond, IBP president and chief operating officer, opened the trial in Delaware Chancery Court of IBP's suit to force Tyson to follow through on the agreement.

Bond says IBP's chairman, Robert L. Peterson, discussed financial accounting problems at the subsidiary, DFG Foods in Chicago, with Tyson chairman John Tyson and other executives at a meeting in December when Tyson was preparing an offer for IBP.

Tyson, based in Springdale, Ark., announced on Jan. 2 a deal to buy IBP, of Dakota Dunes, S.D., for $3.2 billion and assume $1.5 billion in IBP debt. The company called off the deal in late March, alleging that IBP had provided misleading information about the company's worth.

Experts in mergers and acquisitions say the case is unusual because of the claims by Tyson that IBP fraudulently induced the transaction. Tyson was forced to raise its bid because of a competing offer from Smithfield Foods. It called off the deal in a letter to Peterson on March 29, saying it had only learned of a Securities and Exchange Commission investigation into the DFG subsidiary on Jan. 10, several days after reaching the deal.

In court filings, Tyson said it was tricked into overpaying for IBP. It maintains the beef and pork company will be unjustly enriched if it is
permitted to keep the $66.5 million breakup fee advanced by Tyson.

Source: Associated Press