Whither Swift?

GREELEY – No one disputes that a possible sale or merger of Greeley-based Swift & Co. could have a significant impact on the city’s – and the region’s – economy.

With more than 1,700 jobs at its beef and lamb processing plants in northeast Greeley and another 440 at its corporate headquarters in west Greeley – an annual payroll of $53 million – any major change in Swift’s presence in the city would send ripples through the local agriculture and business communities.

But one longtime Greeley businessman believes that the worst-case scenario – a closure of Swift’s plants and HQ – would not be a devastating blow to the city’s economy, and might even be a good thing.

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Ken Whitney, partner and co-owner of certified public accounting firm Anderson and Whitney PC and a former president of the Greeley Chamber of Commerce, said he wouldn’t be surprised to see the nearly 47-year-old Swift plant to close if the company is sold or merged with another.

“I wouldn’t be surprised if they close it,´ said Whitney, whose firm once performed accounting services for Monfort of Colorado, the plant’s former owner. “They’re going to do whatever is the most competitive. But the plant is old and, like old generals, old packing plants just fade away.

“I wouldn’t hit the panic button over it,” he said. “I think we can come out of this OK.”

Whitney said he’s watched the history of meatpacking in Greeley unfold over the last five decades and he’s not sure it’s been overall a positive thing for the city. Back in 1961, when local rancher Warren Monfort and his son, Kenneth, purchased the newly built Greeley-Capitol Pack Inc. slaughterhouse and renamed it Monfort of Colorado, it was a much different situation, he said.

Local family ownership always kept the local community’s interests uppermost in business decisions, Whitney said. But when the Monforts sold the company to Omaha-based ConAgra Foods Inc. in 1987, the local emphasis began to wane, he said.

To ConAgra’s credit, the food giant operated the Greeley plant for 15 years and built a new corporate office in west Greeley in 2000. But in 2002, ConAgra sold its beef division to HM Capital Partners, a Dallas-based investment group, and Booth Creek Management, a Vail-based management firm headed by investor George Gillette Jr., for an estimated $1.4 billion.

Bought to sell

Those firms, in company ownership statements on Swift’s Web site, make no secret of their business focus – to buy a business, upgrade it and sell it for a profit.

“Since its inception in 1989, (HM Capital Partners) has completed more than 150 transactions in (food and media) sectors for a total transaction value in excess of $26 billion,” the Web site says. “HM Capital is currently investing and managing a $1.6 billion fund.”

In 2005, Swift’s owners hired Sam Rovit to be company president and CEO. Rovit is also one of seven company officers on Swift & Co.’s board of directors.

Prior to joining Swift, Rovit headed the global mergers and acquisitions practice for Bain and Co., one of the nation’s leading business-strategy consultants. Rovit’s experience as a mergers and acquisitions expert, coupled with Swift’s investment-oriented ownership, has some industry observers expecting a sale or merger sooner rather than later.

Steve Kay, an analyst with Cattle Buyers Weekly beef industry newsletter, believes Swift’s assets could be broken up and sold as soon as “the next few months.” Kay cites National Beef, a Kansas City, Mo.-based beef processor, as a company that sources have told him has an equity partner lined up to buy Swift or a portion of it.

Repeated phone calls to National Beef seeking comment for this story were not returned.

Kay said he couldn’t reveal his source but he stands by the information. “I’ve been told that, and I’m very confident with the information that came to me,” he said. “I wouldn’t have written it (in the newsletter) unless I was 100 percent sure of it.”

Kay wrote in his Jan. 29 newsletter that a purchase of Swift by one of its most probable buyers – Cargill, Smithfield Foods, Tyson Foods or National Beef – would most likely result in the closure of Swift facilities in Greeley.  

That kind of assessment has some local observers upset. Larry Burkhardt, president of Upstate Colorado Economic Development, said he keeps in close contact with Swift officials and thinks predictions of a plant closure after a sale are purely speculative.

“There’s this one guy, that industry journal editor who has been quoted, and everybody takes his word as gospel,” Burkhardt said. “We have to assume that at some point in time the company will be sold, but to assume that the processing plant will be closed is a little bit premature. It could just as easily be purchased and operated as it is now, or even upgraded.

“I don’t know that any one scenario is more likely than any other,” Burkhardt added. “I do know that it’s not an easy thing to build a beef processing plant. You don’t just put them up overnight.”

Swift tight-lipped

Swift officials are saying little at this point. Swift CEO Rovit granted an exclusive interview to the Greeley Tribune on Feb. 2 in which he predicted that the Greeley packing plant would remain open if Swift is sold. “We are committed to this community,” Rovit said in the interview.

Rovit even held out the possibility of a second shift and expanded employment at the facility if the company is not sold.

Sean McHugh, Swift media spokesman, declined to arrange an interview with Rovit by the Business Report for this story.

“The interview we did with the Tribune was timely and we probably won’t schedule anything else,” he said. “You can take the statements Sam made as to the quality of what the plant can do, its viability and its future operations.”

Rumors of a possible Swift sale have been circulating almost since the day Rovit was hired. As recently as spring 2005 there was widespread speculation that Swift was about to be sold to one of its industry rivals.

Certainly, Swift has had some high-profile and expensive problems since taking over the business. Concerns about Mad Cow disease in 2003 resulted in some countries – including Canada and Japan – temporarily banning the import of beef from the United States. A mislabeled shipment to Japan in November 2006 resulted in that country putting Swift’s Greeley beef shipments on hold just four months after the nationwide ban had been lifted.

ICE storm

But worse was to come. In December 2006, agents from the Immigration and Customs Enforcement division of the federal Department of Homeland Security raided six of Swift’s meatpacking plants, including Greeley. About 1,300 workers were arrested – 265 locally – and charged with being in the country illegally.

Nationwide, 246 workers – 18 in Greeley – were also charged with possessing fraudulent or stolen identification documents. One woman pled guilty to forgery of a government document in Weld County District Court Jan. 25 and agreed to deportation rather than jail time. Hearings for the others facing identity-theft charges are continuing.

Although the ICE shutdown of the six plants lasted only one day and no charges were filed against the meatpacker, Swift later reported that the work stoppage and rehiring process would cost it about $30 million.

Last month, Swift announced an “overhead reduction” program designed to pare its executive management. A total of 70 positions at Swift’s headquarters in west Greeley were eliminated, a move that Swift predicted would save the company $10 million to $15 million annually.

The latest shakeup at Swift came Jan. 22 when it announced that it had engaged financial consultant JPMorgan to help it review its “strategic and financial alternatives.”

Some observers question whether the aging Greeley plant would be kept running under a new owner. “Built in 1959, it is regarded as inefficient in design terms and unlikely to attract interest from prospective buyers except at a very low price,” analyst Kay said.

But Rovit and McHugh reject that notion. “With the amount of value-added work in that facility, in addition to the boxed beef, that makes it a very valuable standalone operation,” McHugh said. “I think the investment we’ve put in that plant in the last several years makes it as good as any plant in the U.S., irrespective of age.”

Greeley ‘would be just fine’

If Swift is sold and Greeley’s meatpacking and corporate headquarters jobs are lost, there’s no doubt that local business and real estate would suffer. But Greeley has already lived through one episode when there was no packing plant in the city.

In 1980, following a bitter strike by union employees, owner Ken Monfort closed the plant for almost two years, reopening it in 1982 without a union.

Bob Tointon, like Whitney another longtime Greeley businessman, said he doesn’t clearly recall the effect the two-year closure had on the city. Tointon at the time was an executive with Hensel-Phelps Construction Co., a Greeley-based firm that mostly worked on projects in other parts of the state and the nation.

“It didn’t impact us, but it certainly impacted housing and retail,” he said. “It kind of depended on who you were and where you were as to the impact it had.”

Tointon said he doesn’t share Whitney’s expectation that the meatpacking plant may close soon and that its loss might not be that bad.

“It would take a while to replace that kind of payroll,” he said. “It’s just a very significant part of the economy right now.”

Whitney said while Greeley and the surrounding area would certainly feel the loss of Swift, the city might eventually be better off.

“It’s not a coveted industry,” he said, noting the smell that sometimes wafts across the city from the plant and nearby feedlots.

Whitney also points to the physical danger of many of the packing jobs, the attraction of illegal immigrant workers and the impact those illegal residents have on the city’s infrastructure and services.

“A lot of things would change, and change is good if we can control it,” he said of a possible plant closure. “In the long run it would all squeeze out and be all right. I think Greeley would be just fine.”